AbbVie Inc. (ABBV)

You absolutely have to hold on to it if you have a 2 year outlook. Humera is the largest selling drug in the world. They are forever in patent disputes. They have taken this cash cow and used the proceeds to reinvest in their pipeline. They have a great balance sheet and a great yield. We are seeing great results from their trials. It should have double digit growth and should be at 15 times. It should consolidate higher than where it is.

(Top Pick Jun 23/16, Up 23.30%) He still likes it and it is one of his favourite healthcare names. It has a 12 times PE and 8% long time growth rate. It trades at a discount to its peer group. Humeria is 60% of their revenues so we have to watch this concentration risk.

(Market Call Minute.) The spinoff from Abbott Labs (ABT-N). What makes him hesitate about this is that it is more of a 1 product company with their Humira drug. It represents about 65% of their total revenue, so that presents risks.

This is kind of the by-product of one of these ultra blockbuster drugs. Their anti-inflammatory franchise is the largest selling drug right now. The company has done a good job of building out their pipeline. They have a cancer drug that is expected to be one of the top 10 by 2020. May 17 is a key date for the company as there is a challenge. Trading at 12X earnings, and going down to 10X with the dividend yield under 4%, so he would be cautious until May 17.

(A Top Pick Dec 23/16. Up 4%.) A one trick pony with their drug Humira. Valuation is quite reasonable and is going to be 12-13X projected earnings. A lot of that is based on sales of Humira, a life altering drug, which accounts for over 60% of their revenues. Made 2 very large acquisitions in the past few years, and we are starting to see some of those drugs in the pipeline getting approved.

He is on the more optimistic side of this company. It has Humira, the largest selling drug in inflammatory related diseases. Because of that, they are going off patent. Everybody knows there is going to be competition for Humira, which he feels is being factored in to their forward earnings. They’ve known this too and have been building out their pipelines. He likes their 4% dividend. PE is going from 11 to 9 next year, a one-time PEG ratio. You are not paying a lot for the growth.

Thinks healthcare has been an un-forgotten asset class. As a result, there are a lot of companies with compelling valuations. This is trading at about 13.5X earnings. The majority of that comes from the auto immune therapy product, Humira, that really changes people’s lives. This will contribute about $17 billion to total earnings next year. They are seeing huge growth for emerging markets. It has come off patent, but this is an infusion medication with numerous patents around it. They’ve got a good pipeline, because they have made a number of acquisitions. They are expecting earnings growth of about 30% over the next 4 years. Dividend yield of 4.11%. (Analysts’ price target is $71.94.)

Its main product is Humira which works on the immune system. Basically for rheumatoid arthritis, IBD, any of the diseases that act on the immune system. Accounts for close to 60% of their revenue. They just had a great quarter. Saw 17% increase in sales for Humira. Has a fantastic pipeline and very aggressive growth targets. Trades at a pretty reasonable valuation considering it is a growth company. They anticipate double digit growth in each of the next 4 years, and to get revenues up to $37 billion a year. If successful and are able to get their operating margins where they say, by 2020, based on current valuations of 14.5X earnings, you will be paying about 8X.

From a valuation perspective, he likes this a lot. This was a spinoff from Abbott Labs (ABT-N) in 2013. They are more of a research based pharmaceutical global name. Has a really good pipeline with 20 new products and indications coming through in the next few years through 2020. Shares are pretty attractively valued, trading at a forward price earnings multiple of only 12X. Long-term EPS growth rate is only 13%. You also get a 3.7% dividend yield, which is expected to grow at almost double digit over the next few years.

This is a result of a spinoff from Abbott Labs 2 or 3 years ago, and they took the pharmaceutical portion, which consisted primarily of 1 drug, Humira. That drug makes up 60%-65% of their revenue, which gives him great pause. Companies, where a large percentage of their revenues are based on one product is a worry. Believes the Humira patent comes off in a couple of years.

(A Top Pick Oct 2/14. Up 14.9%.) They use the specialty Pharma’s that Valeant (VRX-T) is in trouble with, but it is not a huge portion of their revenues. It is widely speculated that they will use their cash to make an acquisition as opposed to buying back stock. If so, that should improve the stock price. If it doesn’t, then he thinks it will be a good take out candidate for somebody else.

If you want to find a way to get yourself mangled, get into Biotech’s. They are expensive and a lot of them are trading on the hopes that whatever they are doing will get approved. Approval rate of these things is so low that it makes it a bit of a gamble. This one is a cut above the pure, speculative biotechs because they have stuff and they actually earn money. Trading about 15% above its FMV. However, earnings forecasts have been kind of flat lining recently. Has pretty good support technically around $60.

Abbot (ABT-N) spun them off. She kept the labs division. She decided not to keep ABBV-N because of the dependence on Humira.

(A Top Pick Nov 14/13. Up to 48.85%.) Sold his holdings. Healthcare is identifiable, as clearly in a secular bull market for investors. He prefers focusing on the whole sector.

(A Top Pick Nov 14/13. Up 37.05%.) Exited his position. One of the big drivers for him to get out was the split as he likes to hold whole positions. A little overbought right now and they could come back to around $52. This whole space is really good. If you own, continue to Hold. (See Top Picks.)