Teva Pharmaceutical (TEVA)

A cheap, but troubled stock. It is the leading generics pharmaceutical provider globally. They overextended themselves a while ago, in trying to get into specialty Pharma areas, which has been a bit of a problem. Expected to generate a little over $5 in earnings next year, a 6X earnings multiple. The Pharma sector as a whole tends to be 3X, so this is very, very cheap. The dividend is over 4%. The negative is that the management team is in flux. Also, the Department of Justice now has an inquiry into price fixing potential by the generic providers. The balance sheet is incredibly levered at 4.8X EBITDA. This is worth taking a half position and then growing that out. If things start to normalize and they get the earnings they are projecting, it should really start seeing 20%, 30%, 40% growth from here.

Made a huge acquisition and overpaid massively for it. The generic drug industry is a competitive industry. The patent is there for anybody to look at. It looks cheap, but they still have a big slug of debt from their acquisition.

The largest generic company globally. They need a new CEO. They acquired Allergan. There are a lot of things happening, so it is a wait and see story. A very good company and incredibly cheap. They can maintain their dividend yield, which he thinks is at about 4%.

He looks at technical and fundamental. Technically you don’t have backup from the fundamentals. You need to see the chart validated.

The 200 day, 50 day and 100 day moving averages have all fallen. The price is below those averages, so there hasn’t been a breakthrough. However, there seems to be a bit of a basing pattern over the last few months. Is it going to start the shares rebounding? It’s hard to say. It could be a bit of a value trap at this point.

It was a pick two shows ago. Soon after buying it he sold at a loss. He bought it because it was selling at historically low valuations. Very shortly after, the CEO abruptly quit and no reason has been given.

(A Top Pick Jan 17/17. Down 1%.) He is not investing for only 2 months, but for at least 12 months. Healthcare is still under pressure. This is #1 in generics globally.

Pharmaceuticals tend to do well during the summer. A bit more of a defensive play, but not during the past few years with all the political rhetoric going on. They tend to do well between May/June all the way through to October. That is the period that runs up to the cold and flu season creating increased shipments of pharmaceuticals. Looking at the past periods of seasonal strength, this company hasn’t been benefiting. It has been underperforming the market, and the trend is firmly lower. Its major moving averages are all trending lower. However, at around $32, it is trying to find a floor. If you are a nimble enough trader, you could play off the $32. The positive momentum divergence suggests that selling pressures are waning, so it could have an upside move here.

Wouldn’t be a buyer of this today. He expects generic drug prices today would be on a downward trend. He still sees 5%-8% growth in branded drugs. The current trend for generic drugs is -9%. He is going to stand on the sidelines until he sees where generic prices level out.

(Market Call Minute) The CEO just retired. This is the stock that everybody loves to hate. Its biggest drug is coming off patent. But it sells drugs in 200 companies around the world, it trading at around 8 times earnings, and is the cheapest of all big pharma in the world.

There are a lot of big problems here. Their CEO has resigned, there were corruption charges in a number of countries for bribery, a couple of their big drugs have come under attack by generics. We are in a bull market, so do you really want to fight this battle?

One of the largest generic pharma companies in the world. The CEO left the company. Earnings came out today and they beat their numbers. They made an acquisition which they have to integrate into their overall company. 6 times earnings and a 4.2% dividend yield. In the long run it is a good stock.

Look forward and not backwards. There is a lot of bad news behind them. There is some headline risk around a bribery scandal. They control about 20% of the generic drug market. Let’s see what happens when a new CEO comes on. Your risk is more down sided than your reward has upside.

There will be a time when this will be a hero stock for someone who bought it at the low. However, that is a tough call to make. Your odds of getting it right are low. The whole space is highly political right now.

This has been a good company for a long time. A leading global generics provider. Pharma in general has been really under the gun. With so much pressure from both a Clinton and Trump, it is really a focus area and will be one of the most attractive areas once the dust settles and there is some clarity on it. Right now, there is tremendous pressure on drug prices.