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No. of Recommendations: 7
ABBV: a good buy now?

There’s an inherent risk to investors, and company profitability, when a pharmaceutical company’s biggest seller’s patent protection erodes or disappears. Specifically, for ABBV, it’s the drug Humira.

The risk to investors is two-fold. First, expecting the worse, even though the company prospers and grows in spite of the dwindling sales—or the slowing growth of sales—of its blockbuster. This is a perceptual problem and a tax imposed by Mr. Market for his pessimism by a depressed share price. The other risk is that, indeed, company earnings do suffer and the drug pipeline, and/or acquisitions, are not sufficient to successfully offset a patient loss. In the long run, the second problem is much worse.

I liken drug companies with block buster patient protected drugs to other companies who have a few really big customers. Sometimes big customers will unexpectedly walk away turning the tables for the company and leaving it scrambling. These are the risks for companies (and their investors) with a limited customer base, or a limited product base. Not only does diversification provide insurance for investors, it does for companies too.

kelbon
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….er,uh...."good" buy.

Not enough coffee yet!

Murph
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No. of Recommendations: 2
Hi Murph,
I like Abbv also but will only pick it up when the trailing dividend hits above 4%. I like Amgn when the trailing dividend hits above 3%. I feel that this give me a good value point to add at with both stocks.

Andy
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No. of Recommendations: 3
Hi Andy!

I'm curious.....why do use the trailing dividend rate versus current quarter annualized? If we were talking about a company likely to cut their dividend, I can see your point, but for me, the ABBV dividend rate is now above 4% (.96 X 4 / 93.61).


Cheers!
Murph
PRO and MFPP Home Fool
(long ABBV and sold Jan $72.50 Puts)
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No. of Recommendations: 1
Hi Murph,

I'm curious.....why do use the trailing dividend rate versus current quarter annualized? If we were talking about a company likely to cut their dividend, I can see your point, but for me, the ABBV dividend rate is now above 4% (.96 X 4 / 93.61).

That is just the data point that I am using. Someone could use the P/E or the P/S, but I found that using the trailing dividend rate of 3% for Amgn and 4% for Abbv has so far been a good time to buy. Abbv doesn't hit that buy point very often but Amgn does hit the 3% at least a few times a year. Amgn has grown their dividend 3x over 5 years and ABBV has doubled theirs over 5 years (though as we both know that might not still be the case in the next 5 years). So Murph it isn't any rocket science or anything I am using but I found if I have patience, I tend to make money off those stocks at those data points.

I would like to pick up HD and Lowes at a dividend of 3% but probably won't see that till the next recession.


Andy
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No. of Recommendations: 1
Thanks for the explanation, Andy!

Hey, whatever works, right? ;-)

Cheers!
Murph
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Hey, whatever works, right? ;-)

I hope it works :) So far so good. But the guy who jumped off of a sky scraper said the same thing.


Andy
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No. of Recommendations: 7
ABBV: a good buy now?

There’s an inherent risk to investors, and company profitability, when a pharmaceutical company’s biggest seller’s patent protection erodes or disappears. Specifically, for ABBV, it’s the drug Humira.

The risk to investors is two-fold. First, expecting the worse, even though the company prospers and grows in spite of the dwindling sales—or the slowing growth of sales—of its blockbuster. This is a perceptual problem and a tax imposed by Mr. Market for his pessimism by a depressed share price. The other risk is that, indeed, company earnings do suffer and the drug pipeline, and/or acquisitions, are not sufficient to successfully offset a patient loss. In the long run, the second problem is much worse.

I liken drug companies with block buster patient protected drugs to other companies who have a few really big customers. Sometimes big customers will unexpectedly walk away turning the tables for the company and leaving it scrambling. These are the risks for companies (and their investors) with a limited customer base, or a limited product base. Not only does diversification provide insurance for investors, it does for companies too.

kelbon
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