Direct Stock Purchase Plans (DSPPs) are just what they sound like – they let you buy stock in participating companies direct rather than going through a broker. Such programs also offer additional benefits such as automatic recurring investment and full investment of your funds, even if you cannot buy a full share initially.
These programs are offered via the transfer agents that represent the participating companies and are a great way to start to build a retirement nest egg for yourself or an education fund for your children. A DSPP can also be a great gift to a family member.
Specifically, I feel that DSPP participation by investors should be a part of a long-term investing strategy. The way the programs are set up, where it can be somewhat of a hassle to withdrawal your money, make them ideal candidates for buy and accumulate, especially with the full reinvestment of proceeds and dividends – even into fractional shares.
Some may argue that index funds are better places to stash cash for the long-term. There is certainly merit in that philosophy as the stock market as a whole is a fantastic wealth building vehicle. But, there is something to ownership and although lacking in the diversity of a DSPP, over the course of many years or even decades, you will find that some stocks outperform the market and some under perform. For a long-term perspective, both are well-received. Why? If you are investing a single stock or preferably 2-3 DSPPs to have some diversity, in the years the stock outperforms, you can get accelerated appreciation on your investment. In the event of under perform, such phases allow for accumulation of more shares at what may be a market discount. Of course, do not disregard the fundamentals of a company, but more often than not, companies participating in DSPPs are long-established, blue-chip type companies that pay out dividends to shareholders. This is not always the case, but you are more likely to find names of companies you recognize rather than under the radar companies.
I especially suggest DSPPs for your children, especially in a 529 account or a custodial account. Please consult your financial planner for the best situation for your needs, but I find it a great thing to start building for your children’s future at an early age.
DSPPs have many elements to their make-up. Some of these include:
· Minimum initial purchase
· Purchase fees
· Online access
· Electronic automatic investments
· Reinvestment fees
In many cases, the companies charge initial set up fees or ongoing fees to help maintain the account. This makes sense considering the company incurs fees from the transfer agent to administer the plan, but many plans have no fees at all to enroll and purchase shares – some even offer discounts.
May I suggest the following three DSPP for a balance, affordable direct investment strategy for your children and part of your long-term financial goals?
Pfizer (NYSE: PFE)Pfizer has not been the world’s favorite stock in 2007. Pulling multiple drugs and citing rising costs, PFE has failed to keep pace with the rest of the pharmaceuticals. However, Pfizer is a great DSPP selection. The downside is a $500 initial requirement for participation, but after that, there are no requirements for recurring investment frequency. Of course, you have the option of monthly recurring investments – with a minimum of $50 – or making one-off purchases at your convenience with a minimum of $50. Fundamentally, I like Pfizer – and while analysts are saying it may be a couple of years, at least, before Pfizer returns to growth, this provides opportunity to build up some shares at these prices. Pfizer has raided their dividend every year for as long as anyone can remember and it seems that this trend will continue. The 4.5% yield offered by Pfizer at current market prices rivals the return that most savings or money accounts will give you – all without minimum balances or service fees. I think that over the course of the next 20-30 years, Pfizer is a winner. It certainly will not be the biggest winner, but having exposure to the pharmaceutical sector makes a great deal of sense. Additionally, taking the time to acquire some shares now, especially at these levels, should pay off over the years to come as we look for dividend increases which will significantly boost the yield on your initial shares. Plus, to keep things simple, as long as there is a need for medicine, Pfizer will remain an industry leader and a safe place to put some money aside for the future.
Health Care REIT (NYSE: HCN)
The biggest knock on HCN is the $1,000 minimum requirement to establish an account – that can be a good chunk of change, especially for your two-year old. HCN sports all of the features you would expect from a solid DSPP, such as no purchase fees, full reinvestment of dividends, and option for a recurring investment. However, one thing that makes HCN stand out from many DSPPs is the 2% discount offered on initial purchase of shares, new purchases of shares, and on shares purchased through reinvestment of dividends. 2% is not a huge difference maker, but consider it like getting a match from your employer in your 401(k). Anytime you can buy stock for the long-run at even a slight discount, it is a win, especially with HCN’s history of raising dividends. As a REIT, do not expect huge growth, but HCN is well positioned to take advantage of the well documented need for healthcare and things like assisted living facilities. As of December 31, 2006, HCN’s portfolio consisted of over 550 properties, including assisted living facilities, skilled nursing facilities, independent living care retirement communities, and specialty care facilities. HCN continues to build its portfolio – adding over $400M in new acquisitions alone in the second quarter of 2007. This means more property and increased dividends over the long-term as more rents are collected. HCN has been around for nearly 40 years.
IndyMac Bancrop (NYSE: IMB)IndyMac is the 7th largest savings and loan and 2nd largest lender in the nation. The DSPP sports an affordable minimum investment requirement of $250 and company paid fees on all purchases and reinvestments. This bank has taken a hit with the recent mortgage and real estate slowdown and currently trades close to its 52-week low. The company’s trailing dividend yield is 6.4% but historical dividend yield is closer to 2.7% - inline with other banks. Even with such a high yield, the payout ratio is still under 50%, so there is plenty of room for error in the event of an issue. Insiders and mutual funds are currently buying IMB and likely for the long-term. IMB trades at less than 7x current earnings and less than 8x projects earnings. The company is also trading at a slight (10%) premium to book value. The value indicators look good and over the short term, the problems hitting the real estate market may still take their toll on IMB, but with long term goals of generating 15%+ return on equity each year, I like my chances.
Of course, there are many tremendous, established companies that offer DSPPs to investors - and most are good choices. However, if you were to ask me where I am putting some money aside for myself and my daughters, these three get the nod.
Showing posts with label pfe. Show all posts
Showing posts with label pfe. Show all posts
Tuesday, July 10, 2007
Thursday, April 12, 2007
Merck (NYSE: MRK) Blows Out The Street
Although Merck (NYSE: MRK) does not officially announce their 1Q 2007 results until April 19, they let the cat out of a bag a little bit today at around 6:30pm. In short, MRK expects better than expected 1Q 2007 results and is raising their EPS guidance for 2007 by about 5% when compared to their original projections. See article at Yahoo! Finance.
MRK was up big-time on the news - up over 3.5% to $48 in after hours trading. I believe we will also see some upgrades on MRK in the coming days, likely to sector outperform or overweight. Apart from their 3.3% dividend yield, which is very nice for a company showing the growth and results they are having, the cards are stacking up nicely for MRK to perhaps reach their all-time high levels of $90+ per share in the coming 3-4 years.
I know it is typically buy on rumor, sell on news, but this might be a little different considering their blow out guidance is well above what anyone expected. I do expect a strong Friday, and likely some profit taking over the next couple of days, but reaching $50 per share is very likely in the coming weeks.
MRK has solid financials and a great drug pipeline, developed both through internal R&D and strategic acquisitions. I am not a huge MRK advocate, as everyone knows about it, but this is a great retirement investment. Even with the recent climb in price, the market is open 9:30am-4:00pm, Monday-Friday - any time within that framework is a good time to buy if you have a 10+ year time horizon.
Also, to continue gloating about the 'expert' saying PFE is a better pick than MRK, well, it's now Terence 2, Experts 0.
FYI, I own PFE as well for myself and my daugthers via their DSPP - same as in MRK - and I believe that PFE will do well in the long term and continue to raise their annual dividend. MRK's success should also spillover some into the PFE realm. PFE was up 1.6% today and up another 0.5% after hours on the MRK news.
MRK was up big-time on the news - up over 3.5% to $48 in after hours trading. I believe we will also see some upgrades on MRK in the coming days, likely to sector outperform or overweight. Apart from their 3.3% dividend yield, which is very nice for a company showing the growth and results they are having, the cards are stacking up nicely for MRK to perhaps reach their all-time high levels of $90+ per share in the coming 3-4 years.
I know it is typically buy on rumor, sell on news, but this might be a little different considering their blow out guidance is well above what anyone expected. I do expect a strong Friday, and likely some profit taking over the next couple of days, but reaching $50 per share is very likely in the coming weeks.
MRK has solid financials and a great drug pipeline, developed both through internal R&D and strategic acquisitions. I am not a huge MRK advocate, as everyone knows about it, but this is a great retirement investment. Even with the recent climb in price, the market is open 9:30am-4:00pm, Monday-Friday - any time within that framework is a good time to buy if you have a 10+ year time horizon.
Also, to continue gloating about the 'expert' saying PFE is a better pick than MRK, well, it's now Terence 2, Experts 0.
FYI, I own PFE as well for myself and my daugthers via their DSPP - same as in MRK - and I believe that PFE will do well in the long term and continue to raise their annual dividend. MRK's success should also spillover some into the PFE realm. PFE was up 1.6% today and up another 0.5% after hours on the MRK news.
Sunday, March 4, 2007
2007 - The Year of the Owner - The Week Ahead & The Week Past
Last week, the stock market suffered its worst week in over 4 years. Everything was hit hard last week - and not just here in the USA, but overseas as well. The biggest loser was the Chinese stock market, losing 9% in a single day. European markets took big hits - this was especially noted by NBG declining 11%+ from its recent $11.25 high to close the week at a little over $10.00 per share.
Honestly, in short, I have not seen anything like this in years, or maybe ever. Sure, it has happened before, and long term, this will be yet another blip on the stock market's radar (knock on wood), but just about everything was down. Typically, you see general market weakness, but maybe a particular sector or industry shows strength. For instance, technology may be down, but energy or natural resources may be up. Not this time - everything was down - energy, materials, transportation, financial services, technology, etc. Greenspan coming out of the weeds to comment about a possible recessions by the end of the year did not help the cause of stocks.
Here is my take on it, for what it is worth. I think that last week's action was very health in terms of a correction. Although it would be nice if it could, the stock market cannot go up in a straight line forever. Even with last week's loss, the markets are still up 10% from a year go. If you take a look at my Marketocracy fund, even after last week's debacle, my fund is still up 0.9% YTD and while the NASDAQ, Dow Jones, and S&P 500 have not been as fortunate (down 2%, 2.8%, and 1.9% respectively). All I am saying, is that this is not the end of the world.
I think that the U.S. economic outlook does look good for 2007 as does the outlook for the entire global economy. I think that we will see growth in the stock market, but there will be an even increasingly strong focus on fundamentally sound and cash generating companies. I think this is so because even amidst last weeks problems, Merck (NYSE: MRK) and AIG (NYSE: AIG) both performed well as both reported very positive outlooks and results and MRK even got an upgrade. Simply put, the market is ready to reward companies that produce strong financial results, but those that are lagging will be susceptible to correction.
There is still a lot of value out there - even after the big run up, the stocks I am in still look cheap from a long term standpoint, especially NBG, PFE, MRK, SEB, and ASHG. I will be looking to add to all of these positions. Of course, I am in the automatic investing plans with PFE and MRK, so those are forgone conclusions. I added 15% to my NBG position last week and will look to increase some more, perhaps in the Spring, post dividend (assuming there is one), as that is when, at least historically, NBG trades a little weaker. If NBG can stick to their projections outlined in their 2007-2009 presentation, this one is worth $24-$28 in the next 2-3 years.
For 2007, I would like to increase my position in ASHG by 50%-100%, especially considering their recent stock activity, raising their dividend by 5%, and I expect strong financial improvements from this company to hit in 2008-2009 as their huge capital expenditures (e.g., Nevada plant development and Arkansas plant expansion) come online. Although it has not been a huge factor yet, I still believe that ASHG being the largest American owned Cement producer in the USA will be a very strong factor for this company - perhaps even a geo-political one. We'll see.
Seaboard Corp (AMEX: SEB) still looks very cheap from a long term perspective and I am very tempted to add more to my position at this time, but will wait until after they report their financial results (due out this week, I think, as they keep a tight lid on it). SEB still is a cash producing machine and are a very diverse entity - they still also appear to be undervalued from a fundamental standpoint - especially after being down 13% from their recent all-time high of $2,300, which just happened 2 weeks ago. SEB is still trading at less than 1x sales, less than 10x earnings, and about 6.4x Enterprise Value/EBITDA. Also, keep in mind that these ratios are based off of the trailing 12 months (ttm) financial results, and I expect when SEB posts their financial results, we will see an increase in sales, a stronger balance sheet, stronger EBITDA, stronger EPS, and stronger free cash flow. The joys about SEB is that because of lack of analyst coverage, the stock is not as subject to 'analyst estimates' and you can focus more on the financials and cash produced by SEB rather than market hype. Short-term, this fact may also prevent SEB from reaching its full-term value, but long term, this is good. It enables you to add more to your position cheaply and long term, companies with this tight share structure and strong financials tend, at least over the long-haul, tend to become 'overvalued', which is a great place to be if you are an owner.
Ok - that is my sales pitch for those stocks, but it is a perfect transition into my thoughts about Greenspan's comments. I do think that the economy is strong and that the environment is good for companies in terms of being able to produce cash flow. I do, however, that we will see some recession-type effects here in the US. I am unsure of how broad they will impact the country or the stock markets, but the impact of American's not saving, high foreclosure rates, getting in over their heads via credit cards, etc. will take a toll. I am no expert economist, but I just don't know how people live the lifestyles they do now-a-days in terms of what they make, what they have, etc. For private individuals, the behavior is not sustainable and I think we will see some fall out of that in the coming months, which will likely impact financial results of companies in late 2007 and early 2008. The impact will be especially true with businesses that serve the individual consumer, especially in businesses that serve the "middle class." Banks will do fine - businesses that service other businesses will do fine - companies that produce cash and shareholder's equity, and reward owners via dividends and stock buy backs, at good clips will be fine.
Simplistically, 2007 is the year for the owner - not the investor. Granted, there are some years where being an 'investor' would serve you better than acting as an owner - where you looked for aggressive capital appreciation based on market dynamics, momentum, etc. Of course, there will be opportunities along those lines this year, as they always are, but I don't see a broad technology rally or sector rally where you can just ride the wave.
Look for opportunities where being an owner makes sense - where you feel you are getting some value for your investment/purchase - where if you were actually going to 'own' the company (which you do, but you know what I mean), you would feel good about forking over the money to get in on it because you know you are getting a good deal. Buy backs, dividends, cash flow, shareholders equity - those are the things to look for and I believe the stock market will reward shareholders appropriately for such (e.g., higher price per share).
To quote Gordon Gekko:
"The richest one percent of this country owns half our country's wealth, five trillion dollars...You got ninety percent of the American public out there with little or no net worth. I create nothing. I own."
Honestly, in short, I have not seen anything like this in years, or maybe ever. Sure, it has happened before, and long term, this will be yet another blip on the stock market's radar (knock on wood), but just about everything was down. Typically, you see general market weakness, but maybe a particular sector or industry shows strength. For instance, technology may be down, but energy or natural resources may be up. Not this time - everything was down - energy, materials, transportation, financial services, technology, etc. Greenspan coming out of the weeds to comment about a possible recessions by the end of the year did not help the cause of stocks.
Here is my take on it, for what it is worth. I think that last week's action was very health in terms of a correction. Although it would be nice if it could, the stock market cannot go up in a straight line forever. Even with last week's loss, the markets are still up 10% from a year go. If you take a look at my Marketocracy fund, even after last week's debacle, my fund is still up 0.9% YTD and while the NASDAQ, Dow Jones, and S&P 500 have not been as fortunate (down 2%, 2.8%, and 1.9% respectively). All I am saying, is that this is not the end of the world.
I think that the U.S. economic outlook does look good for 2007 as does the outlook for the entire global economy. I think that we will see growth in the stock market, but there will be an even increasingly strong focus on fundamentally sound and cash generating companies. I think this is so because even amidst last weeks problems, Merck (NYSE: MRK) and AIG (NYSE: AIG) both performed well as both reported very positive outlooks and results and MRK even got an upgrade. Simply put, the market is ready to reward companies that produce strong financial results, but those that are lagging will be susceptible to correction.
There is still a lot of value out there - even after the big run up, the stocks I am in still look cheap from a long term standpoint, especially NBG, PFE, MRK, SEB, and ASHG. I will be looking to add to all of these positions. Of course, I am in the automatic investing plans with PFE and MRK, so those are forgone conclusions. I added 15% to my NBG position last week and will look to increase some more, perhaps in the Spring, post dividend (assuming there is one), as that is when, at least historically, NBG trades a little weaker. If NBG can stick to their projections outlined in their 2007-2009 presentation, this one is worth $24-$28 in the next 2-3 years.
For 2007, I would like to increase my position in ASHG by 50%-100%, especially considering their recent stock activity, raising their dividend by 5%, and I expect strong financial improvements from this company to hit in 2008-2009 as their huge capital expenditures (e.g., Nevada plant development and Arkansas plant expansion) come online. Although it has not been a huge factor yet, I still believe that ASHG being the largest American owned Cement producer in the USA will be a very strong factor for this company - perhaps even a geo-political one. We'll see.
Seaboard Corp (AMEX: SEB) still looks very cheap from a long term perspective and I am very tempted to add more to my position at this time, but will wait until after they report their financial results (due out this week, I think, as they keep a tight lid on it). SEB still is a cash producing machine and are a very diverse entity - they still also appear to be undervalued from a fundamental standpoint - especially after being down 13% from their recent all-time high of $2,300, which just happened 2 weeks ago. SEB is still trading at less than 1x sales, less than 10x earnings, and about 6.4x Enterprise Value/EBITDA. Also, keep in mind that these ratios are based off of the trailing 12 months (ttm) financial results, and I expect when SEB posts their financial results, we will see an increase in sales, a stronger balance sheet, stronger EBITDA, stronger EPS, and stronger free cash flow. The joys about SEB is that because of lack of analyst coverage, the stock is not as subject to 'analyst estimates' and you can focus more on the financials and cash produced by SEB rather than market hype. Short-term, this fact may also prevent SEB from reaching its full-term value, but long term, this is good. It enables you to add more to your position cheaply and long term, companies with this tight share structure and strong financials tend, at least over the long-haul, tend to become 'overvalued', which is a great place to be if you are an owner.
Ok - that is my sales pitch for those stocks, but it is a perfect transition into my thoughts about Greenspan's comments. I do think that the economy is strong and that the environment is good for companies in terms of being able to produce cash flow. I do, however, that we will see some recession-type effects here in the US. I am unsure of how broad they will impact the country or the stock markets, but the impact of American's not saving, high foreclosure rates, getting in over their heads via credit cards, etc. will take a toll. I am no expert economist, but I just don't know how people live the lifestyles they do now-a-days in terms of what they make, what they have, etc. For private individuals, the behavior is not sustainable and I think we will see some fall out of that in the coming months, which will likely impact financial results of companies in late 2007 and early 2008. The impact will be especially true with businesses that serve the individual consumer, especially in businesses that serve the "middle class." Banks will do fine - businesses that service other businesses will do fine - companies that produce cash and shareholder's equity, and reward owners via dividends and stock buy backs, at good clips will be fine.
Simplistically, 2007 is the year for the owner - not the investor. Granted, there are some years where being an 'investor' would serve you better than acting as an owner - where you looked for aggressive capital appreciation based on market dynamics, momentum, etc. Of course, there will be opportunities along those lines this year, as they always are, but I don't see a broad technology rally or sector rally where you can just ride the wave.
Look for opportunities where being an owner makes sense - where you feel you are getting some value for your investment/purchase - where if you were actually going to 'own' the company (which you do, but you know what I mean), you would feel good about forking over the money to get in on it because you know you are getting a good deal. Buy backs, dividends, cash flow, shareholders equity - those are the things to look for and I believe the stock market will reward shareholders appropriately for such (e.g., higher price per share).
To quote Gordon Gekko:
"The richest one percent of this country owns half our country's wealth, five trillion dollars...You got ninety percent of the American public out there with little or no net worth. I create nothing. I own."
Monday, December 4, 2006
Pfizer (NYSE: PFE) - Buy @ $24.80 & Other Updates
Today's big story in the stock market was the 11% decline of Pfizer (NYSE: PFE). On Saturday, PFE announced that it was ceasing development of its new cholesterol drug. This was a huge development because it has been said that this new drug was going to be a huge homerun for PFE and was going to be key in replacing lost revenue from Lipitor once the patent protection expires in 2010. So, with all of this being said, let the panic begin.
In the company's press release, the CEO of PFE was cognizant of the impact of the lost revenues that this event would have on PFE and the stock price. The CEO emphasized strong revenue growth to return in 2009, returning shareholder value through raising dividend & repurchasing shares, and noted the deep product line that is in the PFE pipeline (though admittedly, none had the alleged potential that the new PFE cholesterol drug would have). So, despite this set back, things do not look too bad, right?
Well, the media jumped all over this story all weekend - analysts and stock brokers were hyping the 'end of Pfizer' and the potential for an up to 25% fall in the stock price today. The stock did open low - yes - down 15% at around $23.50, but at that price, the buyers were ready in mass. Funny how EVERYONE says the stock is finished and going to collapse on the heels of this news, yet the buying at the open was huge. In fact, despite a couple of blips down to this price of $23+, you would have to go back to 1997 or thereabouts to when PFE actually first hit this price.
I think PFE is a long-term buy at these levels, but probably best through its direct stock purchase plan as there are absolutely no fees and the key to this one is long term focus. Close to a 4% dividend yield, less than 11x next year's earnings, $1.75/cash on hand (some say to more aggressively purchase shares and to potentially raise the dividend), and over $17B in operating free cash flow.
Of course, with this, I feel even better about my decision to buy MRK over PFE, although the experts said PFE was the better buy. You can see my blog on this from October 13, 2006 (when I went up 1-0) and the original blog on September 5, 2006 (when the article came out and my discussion points).
Regardless, I see this dip as an opportunity to enter into PFE and start accumulating a stake for myself and my daughters. This is certainly a long term one that you want to put a chunk of money in every month or even once a year (Dogs of the Dow Theory), re-invest the dividends, and then just commit to fund your position every year.
Regardless, look for PFE to return to $28 within 6 months - on to other updates.
INFT - At Last We Will Reveal Ourselves to the Jedi
Well, I can see nobody jumped on the announcement and bought any INFT before I bought today. I know this because my trade was the first of the day. I picked some up at $3.69 and $3.70 and it closed at $3.72. I suppose it didn't really bounce up all that much as I thought it had the chance to, but that is a good thing. This provides more time to acquire shares at these levels. In all honesty, it probably will not move up much until 2007 sometime - we may even seen it decline some as we plow through the usual December tax selling. I will strategically and incrementally add to my position during this time.
SEB - Breaking $1,700 - We're Gonna Need a Bigger Boat
Another banner day for SEB - closing at $1,715, up 2.7%. Of course, I wish I bought more at $1,290 when I first blogged on it and I really wish I first bought when it was at $1,200 when I first started looking at it - but, better to wish you bought more than wish you bought less. So, with that being said, I grabbed the sack and picked up a little more today at $1,703.89. The fundamentals for SEB are making it look outrageously cheap from a long term standpoint and there continues to be heavy buying of shares out in the marketplace. Of course, there are shares for sale, but someone is buying them away. Rumor has it that it is the company that is doing so or value investors. I still think SEB is a $2,000+ stock by the end of 2007 and possibly as much as $3,000-$3,500 per share over the next 3-5 years. So, if it gets there, I'll wish I bought more, of course, but I'll feel better knowing I could have had even less than if I didn't pull the trigger at these levels. It probably was not the wisest move to buy near the upper end of the day's range on a very strong day, but I think in the end, I'll be glad I bought some more.
NBG - More Value at $9.20 - BORK! BORK! BORK!
NBG had a tough day down 1.8% to $9.15. I purchased some more last week between $9.26-$9.32, which was well off from its $9.60 highs. The pull back was not at all unexpected following the earnings announcement (buy on rumors, sell on news) and a welcome one. I might look to pick up a little more tomorrow. From a present day value, with the stock at $9.60, analysts said it was 'inline' with its peer group. So, that fact alone should make it a screaming buy at $9.15. Plus, NBG is assembling a massive growth strategy like no other bank in their region. It will be a couple of years before we see the real value from their acquisitions take hold - perhaps even longer - but this is still a $15-$20 stock or has a very viable chance to be within the next 12-24 months.
In the company's press release, the CEO of PFE was cognizant of the impact of the lost revenues that this event would have on PFE and the stock price. The CEO emphasized strong revenue growth to return in 2009, returning shareholder value through raising dividend & repurchasing shares, and noted the deep product line that is in the PFE pipeline (though admittedly, none had the alleged potential that the new PFE cholesterol drug would have). So, despite this set back, things do not look too bad, right?
Well, the media jumped all over this story all weekend - analysts and stock brokers were hyping the 'end of Pfizer' and the potential for an up to 25% fall in the stock price today. The stock did open low - yes - down 15% at around $23.50, but at that price, the buyers were ready in mass. Funny how EVERYONE says the stock is finished and going to collapse on the heels of this news, yet the buying at the open was huge. In fact, despite a couple of blips down to this price of $23+, you would have to go back to 1997 or thereabouts to when PFE actually first hit this price.
I think PFE is a long-term buy at these levels, but probably best through its direct stock purchase plan as there are absolutely no fees and the key to this one is long term focus. Close to a 4% dividend yield, less than 11x next year's earnings, $1.75/cash on hand (some say to more aggressively purchase shares and to potentially raise the dividend), and over $17B in operating free cash flow.
Of course, with this, I feel even better about my decision to buy MRK over PFE, although the experts said PFE was the better buy. You can see my blog on this from October 13, 2006 (when I went up 1-0) and the original blog on September 5, 2006 (when the article came out and my discussion points).
Regardless, I see this dip as an opportunity to enter into PFE and start accumulating a stake for myself and my daughters. This is certainly a long term one that you want to put a chunk of money in every month or even once a year (Dogs of the Dow Theory), re-invest the dividends, and then just commit to fund your position every year.
Regardless, look for PFE to return to $28 within 6 months - on to other updates.
INFT - At Last We Will Reveal Ourselves to the Jedi
Well, I can see nobody jumped on the announcement and bought any INFT before I bought today. I know this because my trade was the first of the day. I picked some up at $3.69 and $3.70 and it closed at $3.72. I suppose it didn't really bounce up all that much as I thought it had the chance to, but that is a good thing. This provides more time to acquire shares at these levels. In all honesty, it probably will not move up much until 2007 sometime - we may even seen it decline some as we plow through the usual December tax selling. I will strategically and incrementally add to my position during this time.
SEB - Breaking $1,700 - We're Gonna Need a Bigger Boat
Another banner day for SEB - closing at $1,715, up 2.7%. Of course, I wish I bought more at $1,290 when I first blogged on it and I really wish I first bought when it was at $1,200 when I first started looking at it - but, better to wish you bought more than wish you bought less. So, with that being said, I grabbed the sack and picked up a little more today at $1,703.89. The fundamentals for SEB are making it look outrageously cheap from a long term standpoint and there continues to be heavy buying of shares out in the marketplace. Of course, there are shares for sale, but someone is buying them away. Rumor has it that it is the company that is doing so or value investors. I still think SEB is a $2,000+ stock by the end of 2007 and possibly as much as $3,000-$3,500 per share over the next 3-5 years. So, if it gets there, I'll wish I bought more, of course, but I'll feel better knowing I could have had even less than if I didn't pull the trigger at these levels. It probably was not the wisest move to buy near the upper end of the day's range on a very strong day, but I think in the end, I'll be glad I bought some more.
NBG - More Value at $9.20 - BORK! BORK! BORK!
NBG had a tough day down 1.8% to $9.15. I purchased some more last week between $9.26-$9.32, which was well off from its $9.60 highs. The pull back was not at all unexpected following the earnings announcement (buy on rumors, sell on news) and a welcome one. I might look to pick up a little more tomorrow. From a present day value, with the stock at $9.60, analysts said it was 'inline' with its peer group. So, that fact alone should make it a screaming buy at $9.15. Plus, NBG is assembling a massive growth strategy like no other bank in their region. It will be a couple of years before we see the real value from their acquisitions take hold - perhaps even longer - but this is still a $15-$20 stock or has a very viable chance to be within the next 12-24 months.
Tuesday, September 5, 2006
Investment Ideas: Merck (NYSE: MRK) vs. Pfizer (NYSE: PFE)
This weekend, there was an article published at MarketWatch.com called "Merck vs. Pfizer", and it was about which was the better investment, MRK or PFE. If you are not familiar with these companies, these are two of the more prominent drug-makers/pharmaceutical companies in the world. MRK is the manufactuer of Vioxx, which has been all over the news because of the lawsuits surrounding deaths related to Vioxx use and MRK's voluntary recall. Pfizer is the maker of Viagra and also makes a lot of over the counter medicines such as Rolaids and Benadryl. Both companies literally have hundreds and hundreds of prescription and non-prescription drugs in their catalog.
Anyway, the point of the article is just what it says...who to invest in if you had to choose between them. In short, both companies are well off their all-time highs and have not performed well in the stock market the past couple of years, despite the growth and strong numbers they have achieved. However, times seem to be changing for both of them and each company seems to be on the rise. PFE is currently trading at $27.96 and MRK at $40.96 (MRK is a Dark Side Stock Pick at $39.65).
The article suggests that PFE is a better buy and over the next 2-5 years will give an investor a return of 74%-118% vs. MRK offering 31%-66%.
I have to disagree with this claim. I believe that MRK is the better buy and will return superior returns to PFE over the coming years.
1. MRK has had more law suit problems than PFE and these lawsuit problems have put pressure on the stock. However, MRK's product line is diverse and ultimately, these lawsuits will subside. PFE has had their share of legal problems, of coursem but the MRK ones have been more widely publicized, it seems. This is a downward pressure element that once removed, will allow MRK to move up more quickly than PFE that is essentially through their legal problem phases for the time being.
2. MRK has superior financial ratios across the board. MRK has more revenue per share, more cash per share, a 'cheaper' price to earnings ratio (both current and estimated), a cheaper price to growth ratio, a better debt position, and better return on equity and return on assets (despite MRK having lower operating and profit margins than PFE). MRK also has better year over year (yoy) revenue growth and earnings per share (EPS). In short, every major financial ratio points to MRK being a better 'value buy.' Compare MRK Key Statistics to PFE Key Statistics.
3. The article speaks that PFE has a bigger liquidity or buy out premium meaning that PFE is likely to fetch a higher buying price should they get bought out. I do not think this makes sense either as PFE is over 2 times as large as MRK and typically, the larger firms acquire the smaller firms. I do not believe that a merger of sorts is in the work for either of these companies anytime soon, however, I think MRK would stand to gain more from a buy out vs. PFE.
One thing that is in PFE's favor is the dividend yield. MRK has historically yielded 3.5%-3.7% in dividends to its investors; this is right in line with where it is currently at. PFE, on the other hand, has averaged a 2.1% yield over the same time period and it is currently at a 3.3% yield. So, this may suggest that the stock price would correct or be more likely to rise. The dividend yield is calculated by taking the annual dividend per share and dividing by the stock price. So, if PFE were to return to a 2.1% yield and be paying out the same dividend, the stock price would have to be at $46-$47 per share. Of course, one can argue that MRK has had a longer, stronger history of paying out higher dividends. It also seems that PFE is trying to play catch up in this arena. The dividend payout per quarter per share has grown from $0.11 to $0.24 since 2001, a 118% increase. MRK's has grown from $0.34 to $0.38, an 11% increase. This may also suggest that PFE is growing at a faster rate than MRK and is able to pay out more dividends, but I think this is more of a function of just paying out more of the available income to shareholders rather than representative of faster revenue growth. At some stage, companies mature, and it is in the best interest of the shareholders to distribute more cash out to the shareholders rather than retain it and keep it in the bank to grow.
All in all, both are good stock picks at this stage, I think, and both should do well over the next 12-24 months, barring any form of disaster, which is possible. But, I personally see MRK as a superior buy when compared to PFE.
Anyway, the point of the article is just what it says...who to invest in if you had to choose between them. In short, both companies are well off their all-time highs and have not performed well in the stock market the past couple of years, despite the growth and strong numbers they have achieved. However, times seem to be changing for both of them and each company seems to be on the rise. PFE is currently trading at $27.96 and MRK at $40.96 (MRK is a Dark Side Stock Pick at $39.65).
The article suggests that PFE is a better buy and over the next 2-5 years will give an investor a return of 74%-118% vs. MRK offering 31%-66%.
I have to disagree with this claim. I believe that MRK is the better buy and will return superior returns to PFE over the coming years.
1. MRK has had more law suit problems than PFE and these lawsuit problems have put pressure on the stock. However, MRK's product line is diverse and ultimately, these lawsuits will subside. PFE has had their share of legal problems, of coursem but the MRK ones have been more widely publicized, it seems. This is a downward pressure element that once removed, will allow MRK to move up more quickly than PFE that is essentially through their legal problem phases for the time being.
2. MRK has superior financial ratios across the board. MRK has more revenue per share, more cash per share, a 'cheaper' price to earnings ratio (both current and estimated), a cheaper price to growth ratio, a better debt position, and better return on equity and return on assets (despite MRK having lower operating and profit margins than PFE). MRK also has better year over year (yoy) revenue growth and earnings per share (EPS). In short, every major financial ratio points to MRK being a better 'value buy.' Compare MRK Key Statistics to PFE Key Statistics.
3. The article speaks that PFE has a bigger liquidity or buy out premium meaning that PFE is likely to fetch a higher buying price should they get bought out. I do not think this makes sense either as PFE is over 2 times as large as MRK and typically, the larger firms acquire the smaller firms. I do not believe that a merger of sorts is in the work for either of these companies anytime soon, however, I think MRK would stand to gain more from a buy out vs. PFE.
One thing that is in PFE's favor is the dividend yield. MRK has historically yielded 3.5%-3.7% in dividends to its investors; this is right in line with where it is currently at. PFE, on the other hand, has averaged a 2.1% yield over the same time period and it is currently at a 3.3% yield. So, this may suggest that the stock price would correct or be more likely to rise. The dividend yield is calculated by taking the annual dividend per share and dividing by the stock price. So, if PFE were to return to a 2.1% yield and be paying out the same dividend, the stock price would have to be at $46-$47 per share. Of course, one can argue that MRK has had a longer, stronger history of paying out higher dividends. It also seems that PFE is trying to play catch up in this arena. The dividend payout per quarter per share has grown from $0.11 to $0.24 since 2001, a 118% increase. MRK's has grown from $0.34 to $0.38, an 11% increase. This may also suggest that PFE is growing at a faster rate than MRK and is able to pay out more dividends, but I think this is more of a function of just paying out more of the available income to shareholders rather than representative of faster revenue growth. At some stage, companies mature, and it is in the best interest of the shareholders to distribute more cash out to the shareholders rather than retain it and keep it in the bank to grow.
All in all, both are good stock picks at this stage, I think, and both should do well over the next 12-24 months, barring any form of disaster, which is possible. But, I personally see MRK as a superior buy when compared to PFE.
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