To The Moon

$Hologic(HOLX)$

Today we’re diving into a stock that came in through a viewer request down in the comments—Hologic Inc., ticker symbol HOLX. It's not a name that comes up often, and that’s exactly why it caught my attention. I’ve actually owned this one before, and written about it in the past, but I don’t think I’ve ever covered it in video format. So, now seems like a great time to take a closer look.

Who is Hologic?

Before we get into numbers and valuation, let’s talk a bit about what Hologic actually does. The company is structured around four key segments, all of which point to a core focus on women’s health:

1. Molecular Diagnostics – This segment is heavily involved in testing for infectious diseases such as HPV, chlamydia, HIV, hepatitis, and COVID-19.

2. Breast & Skeletal Health – They offer mammography systems, osteoporosis screening tools, and other diagnostic equipment.

3. Surgical – Focused on minimally invasive gynecologic procedures, this segment includes products used in surgeries that are less invasive and quicker to recover from.

4. Cytology & Perinatal – This includes products used in cervical cancer screening and other related diagnostics.

So, while not necessarily a household name, this is a company with a firm niche in healthcare—particularly women’s health—and a broad, medically necessary product base.

My Personal Experience With Hologic

I first bought Hologic during the COVID crash in March 2020 as part of a broader buying spree—I picked up about 30 stocks that month, many of which were in the S&P 500. At the time, the market was in freefall, and I focused purely on numbers and valuation. I didn’t know every detail about what each company did—I just had a system and trusted it.

Hologic was one of those picks. I included it in the Cyclical Investors Club on Seeking Alpha, and although my original write-up on it was neutral, I still saw value based on fundamentals. By August 2020, just a few months later, I sold it—not because I didn’t like the business, but because the valuation had already moved up significantly. That trade netted me a 122% gain, while the S&P 500 returned just 41% in the same time frame. So, basically, I tripled the market’s return over six months.

The reason I bring that up isn’t to brag—it’s to emphasize how important it is to have a strategy and stick with it. A lot of people only buy what they know or what's popular—dividend stocks, brand names, and so on. But during the COVID crash, a lot of great businesses were overlooked because they didn’t pay dividends or weren’t well-known.

Key Lessons From That 2020 Trade

Let me zoom out and share a few broader takeaways from that experience that are still relevant today:

1. Unpopular Doesn’t Mean Unprofitable – Hologic wasn’t a household name. It didn’t pay a dividend. And yet, it provided a massive return. Many investors missed out because they weren’t looking beyond name recognition.

2. Valuation Matters – I used a basic PEG-based valuation method—nothing fancy—and when the valuation got stretched, I exited. I didn’t try to time the peak; I just stuck to my process. That’s a critical discipline for fundamental investors.

3. Buy Low, Sell Reasonably – I bought near the bottom and sold once the stock looked fairly valued—not when it got overpriced. That kept the risk/reward in my favor and freed up cash for new opportunities.

What’s Going on With Hologic Now?

Since then, Hologic hasn’t been all that exciting. The stock has basically been flat or declining, and it’s currently down about 30% from recent highs. Let’s try to understand why.

After the COVID boom, where demand for diagnostics surged, growth has slowed significantly. Earnings grew only about 3% annually over the last two years, and the stock has been repriced accordingly.

But now, we're in an interesting spot. Pre-COVID, earnings per share were around $2.49. Last year, they earned over $4.00 per share. If you remove the COVID spike from the chart and draw a trend line, the current earnings trajectory is still higher than pre-pandemic levels.

Analysts are expecting 8–10% growth in the years ahead, but the market seems to be pricing the stock as if there's no growth at all. That creates an interesting potential opportunity.

The Valuation Today

Let’s run a couple of scenarios:

• Base Case: At a 9% earnings growth rate, the stock would provide a 10-year earnings CAGR of about 8% based purely on business performance—not including any multiple expansion. That’s pretty solid, especially for a company with stable fundamentals and modest debt.

• Mean Reversion Scenario: If the stock eventually returns to its average P/E of 17, you could see a 55% total return in 2.5 years, which annualizes to around 20% per year. That assumes the market stops treating this like a no-growth company.

Now, for my own purposes, I look at two buy prices:

• Normal Buy Price: $58. The stock is already trading below this.

• Recession Buy Price: $46. This is where I would likely pull the trigger. It gives me a stronger margin of safety and opens the door for potential triple-digit returns again.

That recession-level price is calculated by applying a historical Great Recession-style multiple on peak earnings, then adjusting it upward by about 40% to reflect the fact that we probably won’t hit those exact lows again.

Social & Political Headwinds

One thing worth mentioning—there are some cultural and political headwinds around diagnostic healthcare today. The company works with tests for HPV, COVID, hepatitis, and other sensitive subjects. There's been a bit of a social backlash in some circles against things like vaccines and testing, and that could be weighing on sentiment.

But over time, necessity tends to override opinion. People get sick, and when they do, they want accurate diagnoses and treatment. I think the long-term demand for these types of diagnostics will persist, even if the short-term political climate is rocky.

Conclusion

So what’s the verdict? Hologic is a solid, overlooked, mid-cap healthcare company with a focused niche and strong fundamentals. The valuation today looks cheap based on historical metrics, especially when you consider that the market is pricing in basically zero growth.

That’s often when value investors want to start getting interested.

It’s not quite at my recession buy level yet, but it’s close enough to keep a close eye on. If earnings growth trends back toward that 8–10% range and the market comes around on it again, this could easily be another multi-bagger setup, especially in a diversified portfolio.

Big thanks to the viewer who requested this one—it was a great opportunity to revisit an old favorite and dust off some valuable lessons.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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