Fortrea Holdings Inc - When Issue

Fortrea helps its biotech and pharmaceutical customers to run clinical trials with the goal of receiving marketing authorization in the U.S. and other countries. The company spun out of Labcorp in June 2023, and is attempting to turn around the business. Fortrea currently trades at a very attractive upside-to-downside ratio.

Fortrea is an example of our 'Crazy Cheap' strategy: buying excellent businesses priced as if their current struggles will last forever. Fortrea faced headwinds, with weak financial results, the loss of a star CEO, and swirling fears about changing US health policy. However, its low price creates an extremely attractive upside-to-downside. There is still downside risk, but it is dwarfed by the probability and magnitude of the upside. Overall, buying good businesses at 'Crazy Cheap' prices has worked well for us.

Fortrea helps its biotech and pharmaceutical customers to run clinical trials with the goal of receiving marketing authorization in the U.S. and other countries. The company spun out of Labcorp in June 2023, and is attempting to turn around the business. Fortrea currently trades at an attractive upside-to-downside ratio.

Fortrea is a contract research organization (CRO) that has been winning new clinical trials and growing its backlog despite recent industry headwinds. The company is nearly finished with its separation from Labcorp, which will reduce expenses. Although the financial picture has been challenging, the manager believes it is improving and that Fortrea will avoid a painful financial restructuring. The CRO industry is characterized by high barriers to entry, and Fortrea's capital-light model allows for good returns on capital. The manager sees potential for Fortrea to return to growth and earn high returns, making the current stock price attractive.