Biotech/Pharmaceuticals
4/20/2016
Analyst: Akshay Srivastava
4/20/2016
Analyst: Akshay Srivastava
Merck and Co. Inc.: Merck is a large biotech company that has very few specializations. It is diversified in the vaccine, consumer product, and oncology markets, even with some holdings in animal health. Notably, however, Bayer bought the consumer products division of Merck in 2015, so they DO NOT trade in any sort of consumer market. They are thus most valuable for their research and development.
Company Statistics:
Bought in 01/2015 at around 62.00
Current Price: 56.87
Dividend: 0.46
Industry Average P/E: Around 24
MRK P/E: 36.32
Market Cap: 158.55 B
PEG: 0.135
Duration Trends: There was a sharp crash in the MRK stock in October 2015 from which they have recently been recovering(very slowly). Recently they’ve been receiving some coverage for developments in their products however nothing dramatic to expect an increase. They are expecting to acquire worldwide rights for an animal product, and have also recently showcased a new treatment at a cancer conference. However, neither of these things seems to be particularly impactful on their stock value.
My Assessment:
Our current loss on MRK is minimal relative to the amount of time that we’ve had the stock and their PEG ratio of 0.135 combined with the high P/E ratio of 36.32 suggests that a lot of people have faith in this stock growing. Looking at this news, I don’t think that’s unjustified and if it is it will be for an unpredictable reason that will stabilize in the long run. We should definitely hold on this stock, the mean payoff we can expect is definitely more promising than the relatively insignificant losses we will take if they continue at their past rate. Also, the Motley Fool really likes this stock, and Merck is involved in the vaccine hunt for Zika.
Teva Pharmaceuticals Lmtd.: Teva is also very well diversified within the pharmaceuticals market, including a very significant consumer products division. Also, TEVA flipping owns Allergen!!! #plottwist
Company Statistics:
Bought in 01/2007 at 32.73
Current Price: 56.67
Dividend: 0.34
Industry Average P/E: Around 24
TEVA P/E: 36.32
Market Cap: 158.88 B
Duration Trends: Teva shows no long-term trends, they are highly volatile both in short-term and long-term trends. However, there has been a gradual increase over the course of our holding the stock.
My Assessment:
Definitely keep TEVA, they have recently acquired Allergen’s generic drug business in addition to their own thriving resources and hence show a lot of process. They don’t look too great now, but they also aren’t doing poorly.
IHF: IHF is an ETF which sketches me out in principal but I took a look into it nonetheless(you’re welcome guys). I don’t like it. They currently are around 92 % healthcare stocks, I don’t know much about their holdings, didn’t really recognize anything to sketch in the top 10.
Stock Statistics:
Bought in 10/2013 at around 89
Current Price: 125.05
Dividend: 0.06
P/E(Average): 17.00
My Analysis: I don’t like how black-boxed ETFs are, but this one is doing really well and so we should hold on this as well.
General Analysis: All of the stocks that we have in biotech/pharmaceuticals seem to be carrying their weight pretty well. It’s important to remember that this industry is one that takes a while for things to happen in, mostly because of the speed of clinical trials and the FDA, etc. . So, even though these stocks might not be as promising in the short-term as some of the others in our portfolio, I definitely think we need to hold on them.
Also, depending on the playing out of the elections we should watch our holdings. If a candidate that’s going to go after these big pharma companies comes out on top we need to get out of the market because all of these are pretty large(except the ETF) and need a lot of funding for RnD.
Other current events that are relevant include the current Zika epidemic, disease scares like that tend to make people like biotech companies.
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