Stock Opinions by Dean Orrico - Stockchase Experts
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Dean Orrico

On Stockchase since : Jun 2003

President at Middlefield Capital Corp.

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Stock Opinions by Dean Orrico - Stockchase Experts

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COMMENT

A globally diversified REIT with exposure in Canada, Brazil, Germany, Austria and Asia. Rather than being in healthcare, they are more of a rent collector. In Canada, in particular, they run medical office buildings, which is a more defensive part of the market. Yield of about 8%. Although it has some positive attributes, the balance sheet is stretched, and a lot of their debts are in convertible bonds.

REAL ESTATE
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A globally diversified REIT with exposure in Canada, Brazil, Germany, Austria and Asia. Rather than being in healthcare, they are more of a rent collector. In Canada, in particular, they run medical office buildings, which is a more defensive part of the market. Yield of about 8%. Although it has some positive attributes, the balance sheet is stretched, and a lot of their debts are in convertible bonds.

REAL ESTATE
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Dean Orrico

President, Middlefield Capital ...

Price Price
$10.160
Owned Owned
Unknown

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HOLD
Gilead Sciences Inc.(GILD-Q) 

January 25, 2017

The sector is trading at 14-14.5 times, while this company is trading at about half that multiple. From that perspective, it is screaming value. However, this was a 2-trick pony with hepatitis C and HIV. The hepatitis C has been slowly decreasing and HIV sales have been increasing, but not enough to offset the decline. Generating tremendous free cash flow, and he thinks the market has taken a bit of a wait and see attitude, to see how management is going to deploy this. The stock has a 2.5% yield, and he would like to see them bump the dividend. They would still have more room in terms of capital to put the money to work, to see where the next leg of growth is going to come from.

biotechnology/pharmaceutical
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The sector is trading at 14-14.5 times, while this company is trading at about half that multiple. From that perspective, it is screaming value. However, this was a 2-trick pony with hepatitis C and HIV. The hepatitis C has been slowly decreasing and HIV sales have been increasing, but not enough to offset the decline. Generating tremendous free cash flow, and he thinks the market has taken a bit of a wait and see attitude, to see how management is going to deploy this. The stock has a 2.5% yield, and he would like to see them bump the dividend. They would still have more room in terms of capital to put the money to work, to see where the next leg of growth is going to come from.

biotechnology/pharmaceutical
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Dean Orrico

President, Middlefield Capital ...

Price Price
$71.910
Owned Owned
Unknown

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COMMENT
Extendicare Inc(EXE-T) 

January 25, 2017

Now nearing the upper end of the valuation range. Looking at the Canadian seniors housing market, you have Chartwell (CSH.UN-T), the largest in the space, and this is in the next tier down. The AFFO multiples are very close, and at the high end of the range. They’ve started to expand into home care which is probably why they have done so well. This is an area where there has been pretty robust margins and lots of growth, with government subsidy. There are better areas where you can get higher yield, and even better valuations with growth, but overall it is a good company to own. Dividend yield of 4.6%.

other services
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Now nearing the upper end of the valuation range. Looking at the Canadian seniors housing market, you have Chartwell (CSH.UN-T), the largest in the space, and this is in the next tier down. The AFFO multiples are very close, and at the high end of the range. They’ve started to expand into home care which is probably why they have done so well. This is an area where there has been pretty robust margins and lots of growth, with government subsidy. There are better areas where you can get higher yield, and even better valuations with growth, but overall it is a good company to own. Dividend yield of 4.6%.

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Dean Orrico

President, Middlefield Capital ...

Price Price
$10.520
Owned Owned
Yes

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COMMENT
Novo-Nordisk(NVO-N) 

January 25, 2017

Has a very small position, and it ranks high on his list. It has done very well in diabetes insulin. However, that is a part of the market where there is starting to be some downward price pressure as more competition has come in. There hasn’t been enough R&D to find out where the next leg of growth is going to be. You would think emerging markets would be a dominant area for them, but they don’t seem to be moving in that direction. The stock is not cheap and gives you about a 2.5% yield. He would like to see an activist investor get involved.

biotechnology/pharmaceutical
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Has a very small position, and it ranks high on his list. It has done very well in diabetes insulin. However, that is a part of the market where there is starting to be some downward price pressure as more competition has come in. There hasn’t been enough R&D to find out where the next leg of growth is going to be. You would think emerging markets would be a dominant area for them, but they don’t seem to be moving in that direction. The stock is not cheap and gives you about a 2.5% yield. He would like to see an activist investor get involved.

biotechnology/pharmaceutical
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Dean Orrico

President, Middlefield Capital ...

Price Price
$35.200
Owned Owned
Yes

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PAST TOP PICK
Medtronic Inc(MDT-N) 

January 25, 2017

(A Top Pick Oct 11/16. Down 9.87%.) For the most part of 2016, there was a rotation out of Pharma and into medical devices. Great company, well-established and a good yield.

biotechnology/pharmaceutical
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(A Top Pick Oct 11/16. Down 9.87%.) For the most part of 2016, there was a rotation out of Pharma and into medical devices. Great company, well-established and a good yield.

biotechnology/pharmaceutical
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Dean Orrico

President, Middlefield Capital ...

Price Price
$74.490
Owned Owned
Yes

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PAST TOP PICK
Rite Aid Corp.(RAD-N) 

January 25, 2017

(A Top Pick Oct 11/16. Down 3.59%.) This was and is subject to a takeover offer by Walgreens. Sold his holdings at about $8.30.

specialty stores
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(A Top Pick Oct 11/16. Down 3.59%.) This was and is subject to a takeover offer by Walgreens. Sold his holdings at about $8.30.

specialty stores
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Dean Orrico

President, Middlefield Capital ...

Price Price
$6.900
Owned Owned
No

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PAST TOP PICK
Roche Holding AG(RHHBY OTC) 

January 25, 2017

(A Top Pick Oct 11/16. Down 2.05%.) A very deep pipeline of drugs and hidden value. It gives you a 3%+ yield. Great company.

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(A Top Pick Oct 11/16. Down 2.05%.) A very deep pipeline of drugs and hidden value. It gives you a 3%+ yield. Great company.

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Dean Orrico

President, Middlefield Capital ...

Price Price
$0.000
Owned Owned
Yes

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COMMENT

What is really going to drive outperformance is having some diversification, but over and above that, be able to overweight which sectors will outperform. A passive product is not going to do that for you. It makes sense to own an actively managed product.

E.T.F.'s
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What is really going to drive outperformance is having some diversification, but over and above that, be able to overweight which sectors will outperform. A passive product is not going to do that for you. It makes sense to own an actively managed product.

E.T.F.'s
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Dean Orrico

President, Middlefield Capital ...

Price Price
$7.930
Owned Owned
Unknown

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COMMENT

He thinks the drivers behind the healthcare sector are as powerful today as they were 6 months ago. However, the environment has been changing, where you need to be more of an active manager, understanding which asset mix makes sense. This is a passive ETF, so you are subject to the whims of the largest names. You should have exposure to the sector, but try to identify something that is more actively managed.

E.T.F.'s
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He thinks the drivers behind the healthcare sector are as powerful today as they were 6 months ago. However, the environment has been changing, where you need to be more of an active manager, understanding which asset mix makes sense. This is a passive ETF, so you are subject to the whims of the largest names. You should have exposure to the sector, but try to identify something that is more actively managed.

E.T.F.'s
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Dean Orrico

President, Middlefield Capital ...

Price Price
$145.780
Owned Owned
Unknown

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COMMENT
Pfizer Inc(PFE-N) 

January 25, 2017

The problem is that it has a fairly thin pipeline of new drugs coming out, which is the reason they have gone out to try and make acquisitions. This now leaves them wondering where the next leg of growth is going to come from. 4%+ yield.

biotechnology/pharmaceutical
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The problem is that it has a fairly thin pipeline of new drugs coming out, which is the reason they have gone out to try and make acquisitions. This now leaves them wondering where the next leg of growth is going to come from. 4%+ yield.

biotechnology/pharmaceutical
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Dean Orrico

President, Middlefield Capital ...

Price Price
$31.290
Owned Owned
Unknown

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TOP PICK
Roche Holding AG(RHHBY OTC) 

January 25, 2017

Deep pipeline. Attractively valued. It has a couple of drugs that are nearing approval in the 1st half of this year. One is in the breast cancer area and one in the bio similar area. Dividend yield of 3.46%. (Analysts’ price target is CHF 278.65.)

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Deep pipeline. Attractively valued. It has a couple of drugs that are nearing approval in the 1st half of this year. One is in the breast cancer area and one in the bio similar area. Dividend yield of 3.46%. (Analysts’ price target is CHF 278.65.)

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Dean Orrico

President, Middlefield Capital ...

Price Price
$0.000
Owned Owned
Yes

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TOP PICK
Bristol Myers Squibb(BMY-N) 

January 25, 2017

A company with a very deep pipeline of drugs, one of the major ones being the cancer drug Opdivo, specifically in the immuno oncology area, which the market has written off for now. Merck (MRK-N) has clearly beaten them to the punch on lung cancer with Keytruda, but there is still a vast market, awaiting on the Opdivo end, and he thinks the market is not giving it its due value. Also, this is a potential take out candidate for something like Johnson & Johnson (JNJ-N) or Pfizer (PFE-N). Dividend yield of 3.16%. (Analysts’ price target is $59.12.)

biotechnology/pharmaceutical
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A company with a very deep pipeline of drugs, one of the major ones being the cancer drug Opdivo, specifically in the immuno oncology area, which the market has written off for now. Merck (MRK-N) has clearly beaten them to the punch on lung cancer with Keytruda, but there is still a vast market, awaiting on the Opdivo end, and he thinks the market is not giving it its due value. Also, this is a potential take out candidate for something like Johnson & Johnson (JNJ-N) or Pfizer (PFE-N). Dividend yield of 3.16%. (Analysts’ price target is $59.12.)

biotechnology/pharmaceutical
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Dean Orrico

President, Middlefield Capital ...

Price Price
$49.550
Owned Owned
Yes

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TOP PICK

Management has shown to be very effective in growing through development and acquisition. They are focused in various areas but the home base is in Ontario where there is a waiting list of about 25,000 people for long-term care beds. Dividend yield of 5.27%. (Analysts’ price target is $13.35.)

other services
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Management has shown to be very effective in growing through development and acquisition. They are focused in various areas but the home base is in Ontario where there is a waiting list of about 25,000 people for long-term care beds. Dividend yield of 5.27%. (Analysts’ price target is $13.35.)

other services
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Dean Orrico

President, Middlefield Capital ...

Price Price
$17.120
Owned Owned
Yes

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N/A
General Market Comment 

October 11, 2016

Healthcare. The opportunity to invest in healthcare stocks right now is excellent. It is as good as he has seen in a long time. Looking at performance generally, it has been really up until September of last year. The healthcare sector was really led by Pharma and Biotech in particular, and were among the best performing parts in the market. Year-to-date, healthcare is probably the worst performing part of the market, and trades today at about 14.5X forward earnings versus about 16.5X the broader market. Biotech was even more attractive at about 11.5X, but he recognizes the value of buying companies that pay dividends, which traditional Pharma does.  

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Healthcare. The opportunity to invest in healthcare stocks right now is excellent. It is as good as he has seen in a long time. Looking at performance generally, it has been really up until September of last year. The healthcare sector was really led by Pharma and Biotech in particular, and were among the best performing parts in the market. Year-to-date, healthcare is probably the worst performing part of the market, and trades today at about 14.5X forward earnings versus about 16.5X the broader market. Biotech was even more attractive at about 11.5X, but he recognizes the value of buying companies that pay dividends, which traditional Pharma does.  

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Dean Orrico

President, Middlefield Capital ...

Price Price
$0.020
Owned Owned
_N/A

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COMMENT
Bristol Myers Squibb(BMY-N) 

October 11, 2016

One of his larger pharma weightings. This is a high quality stock, and is more attractively valued than it was 6 weeks ago, even 6 days ago. Pays an attractive dividend of over 3%. Well capitalized, but has had some challenges with its cancer drug Opdivo. However, that corner of their products is only about 5% of the demand for this class of drugs over time. About a 3rd of a stocks’ value is the markets’ bet on the future product flow, and the best way to understand that is to dig in and look at the patents. Doing this, you are paying about half as much for the future product flow when buying this company versus the typical drug stocks.

biotechnology/pharmaceutical
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One of his larger pharma weightings. This is a high quality stock, and is more attractively valued than it was 6 weeks ago, even 6 days ago. Pays an attractive dividend of over 3%. Well capitalized, but has had some challenges with its cancer drug Opdivo. However, that corner of their products is only about 5% of the demand for this class of drugs over time. About a 3rd of a stocks’ value is the markets’ bet on the future product flow, and the best way to understand that is to dig in and look at the patents. Doing this, you are paying about half as much for the future product flow when buying this company versus the typical drug stocks.

biotechnology/pharmaceutical
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Dean Orrico

President, Middlefield Capital ...

Price Price
$49.550
Owned Owned
Yes

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