Just reported and had quite good earnings. They are reeling, of course, from the government decision to not allow the Allergan deal to go through. There is a lot of debate because the 2 companies were within the law, but the tax inversion issue is a big one, and the way it was done is leaving a bad taste in people’s mouths. Pfizer is just starting to move out of the issue of Lipitor coming off patent. It was a blockbuster drug before, but when it goes generic you see sales drop dramatically. Their pipeline has been building. This company has had basically flat revenues and earnings for 4 or 5 years, and is trading at about 20X earnings. A bit of a “show me” stock, and that goes for most pharmaceuticals. You are better off going into biotechs. Prices have come down quite dramatically, and are trading at cheaper multiples than Pharma drug companies. Have a look at Biogen (BIIB-Q) or Celgene (CELG-Q).
People either love it or really dislike it. He continues to like it. In the last 15 years, this stock has been halved 3 times. It’s not like it is different this time, but you always have to look into the future. This company, over time, is growing well. The latest quarter, which was an off cycle quarter, didn’t grow so well. While everybody wants to fit the equation of quarter to quarter, the product cycle of this company doesn’t work quarter to quarter. Had a fantastic introduction of the S model iPhone, where units grew 40%-45%, followed by the off cycle. Putting the 2 together you had a pretty good progression.
(A Top Pick May 5/15. Down 18.53%.) In the air ambulance business. They have 2 areas of operation, contracting with people that need an air ambulance, and the community side where they work for hospitals transporting patients. Things tend to be fairly lumpy, but looking at a long-term progression it is a really good story. Not expensive.
(A Top Pick May 5/15. Down 10.27%.) Really likes this company. They tripped up by projecting earnings through 2018 of $8, and are just not going to get there, so the market has punished them a little. This media company is really monetizing their content very well through HBO, the over-the-top streaming model. Will probably earn around $6 next year, so it is not expensive. They are not as affected by cord cutting as other media companies. Still a Buy.
Quite expensive, trading in the high 20s on a P/E valuation. Have done a fabulous job. Feels the real catalyst is China. They are moving around the world opening up businesses that are very effective. With online shopping, mall traffic is starting to drop which worries him a little. However, same-store sales have been robust. He doesn’t want to pay up for future growth which is already built-in and is less than guaranteed.
This makes him uncomfortable. He doesn’t like the concentration. They derive over 60% from their hepatitis C drugs, which have been very successful. There are a few issues. Very high cost at about $90,000 for a cure which is a 90-day script. A lot of people are after them to get the price down. There is also competition from other drugs. It is a cure, which is great from a social standpoint, but from a business standpoint do you want to invest in a company where the drug will no longer be needed.
A fabulous company. Have had their hiccups over the years. They are in 3 major areas including consumers, devices and pharmaceutical. The pharmaceutical area has done the best, and is now pushing 45% of their business. Well-managed and a great balance sheet. Valuation is somewhat high at about 20X earnings.
Markets. We are on a teeter-totter in the sense that stocks are not cheap, but earnings are not that good either. We have seen earnings fail to outperform the previous year, 4 quarters in a row, and the next quarter is predicted to be another of those. We are in an earnings recession and are not seeing great earnings. The market has moved up modestly and is pretty much sideways, which is the way it should be. You want to reward good earnings. The correlation between earnings and stock price is the greatest predictor of where things are going. He is comfortable in a seesaw type of market, where good stock picking is rewarded. We are not totally rolling over as an economy. The economy is slow growth, but progressing. What really affects earnings are energy prices and foreign exchange, which tend to be transitory, not permanent. When that starts to turn around we’ll start to see a positive progression of corporate earnings. (You can look at a blog on his website at www.goodreid.com, where he discusses investing for the long-term.)