MYL

Teva: Progressing As Expected; US Generic Revenue Reveals Strength

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On Thursday, Teva (TEVA) reported in-line second-quarter results. For followers of the Best Ideas portfolio, the firm had a rough start shortly after it was added to the portfolio, but recent performance has put holders well into the black. For those interested in the background on the investment thesis on shares of Teva, please have a read of ‘Teva Pharma: Underpriced and Misunderstood.’ Teva’s revenue during the second-quarter nudged 3% higher, while non-GAAP operating income jumped 8%. Non-GAAP diluted earnings per share of $1.23 came in 3% higher than the same period a year ago. The company delivered organic growth in revenue and all profit lines over the comparable quarter last year. Though the results were solid, the thesis on … Read more

Big Pharma Round Up

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Though much has been made about the patent cliff—shorthand for the expiration of the patents of a large number of drugs over a short period of time—we continue to believe that pipelines across much of the pharmaceutical space are flush with new drugs and therapies. Readers may have an individual favorite or two (or three) within the space (and there’s nothing wrong with that), but we think one of the best ways for investors to play the strong pipelines across the healthcare sector—and ongoing consolidation—is through the Health Care Select SPDR ETF (XLV), a holding in the Best Ideas portfolio. The ETF boasts Johnson & Johnson (JNJ), Pfizer (PFE), Merck (MRK), Gilead Sciences (GILD), and AbbVie (ABBV) as its top … Read more

Abbott Ups Guidance; Takes Stake in Mylan

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Abbott (ABT) has a track record that is unrivaled. The firm is more than 125 years old and remains aligned with favorable long-term healthcare trends in both developed and developing markets. We believe Abbott’s nutritionals segment is one of the most attractive businesses in all of the healthcare space, boasting such brand names as EAS, Myoplex, and ZonePerfect. Let’s take a look at the firm’s second-quarter results, which it reported Wednesday. Abbott’s sales in the quarter advanced 3% on an operational basis, while ongoing diluted earnings per share came in at $0.54, representing expansion of more than 17%. The bottom-line figure also came in above its previous guidance range of $0.50-$0.52 per share. The strong results prompted Abbott to raise … Read more

Valuentum Economic Castleâ„¢ Rating Update

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Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

Teva Pharma: Underpriced and Misunderstood

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One of the key benefits of using a discounted cash-flow model is that it allows the user to adequately price a variety of businesses, irrespective of where they are in the economic or product cycle or whether they are engaged in a turnaround or reaching peak levels of operating performance. Unlike a forward price-to-earnings (PE) ratio or even a price-earnings-to-growth (PEG) ratio, where near-term performance can cause mis-valuations at times, the DCF allows the user to forecast fundamentals through the course of the business cycle or through the course of the product cycle in order to arrive at mid-cycle profit projections, which remain critical within the framework of intrinsic value estimation. Though Big Pharma continues to steal headlines via Pfizer’s … Read more

Surveying Fourth Quarter Earnings at Health Care Firms

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The broader equity markets have been under pressure for much of January, and while it may be tempting to consider completely exiting stock investing for a time, we’re staying the course with both of our actively-managed portfolios. We had been expecting a contraction in price-to-earnings (P/E) multiples across the broader market (see our outlook here), and the performance thus far in 2014 has not been surprising. In case you may have missed it, I sent out some very important thoughts over the weekend to keep in mind as uncertainty and volatility increase through the course of 2014: Stay focused on @Valuentum portfolio holdings (best ideas), #asset allocation (cash) in portfolios and #prudence in allocating new capital. — Brian Nelson, CFA … Read more

Merger Rumors Helping Best Ideas Portfolio Holdings

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On Friday, rumors of Dish Network (DISH) and DirecTV (DTV) tying the knot sent shares of both firms higher during the trading session. The potential tie-up is nothing new; we had profiled the potential deal in March this year, but the re-hashing of the idea has some market participants excited. The anti-trust hurdles will be significant for this deal to happen, but it looks like the Department of Justice is warming up to allowing consolidation if recent progress of the merger between AMR Corp (AAMRQ) and US Airways (LCC) is any indication. We love the increased leverage over content creators, the significant cost savings, and the additional financial flexibility that a Dish Network/DirecTV merger would bring. We would expect the … Read more

Niaspan Generic Could Boost Teva

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On Friday, Best Ideas Newsletter portfolio holding Teva Pharma (click ticker for report: ) announced that its generic version of AbbVie’s (click ticker for report: ) Niaspan would hit the US market this week. The news is particularly noteworthy because Teva was the first-to-file, making the product eligible for 180 days of marketing exclusivity (a large windfall for the company). To learn more about the generic industry and the significant benefits of marketing exclusivity, please consult our initiation report on the generics industry here.   Niaspan is a cholesterol drug used to reduce elevated TC, LDL-C (bad cholesterol), Apo B and TG levels, and to raise HDL-C cholesterol (the good variety). Niaspan had annual sales of more than $1.1 billion … Read more

The “Hierarchy” of Valuentum Idea Generation

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Let’s talk about this hierarchy of idea generation in this note. —  A version of this article was sent to members previously. New content has been added.  — Note: We continue to work to optimize the signal-to-noise ratio in our work, and we are evaluating expanding our update cycle to half-year periods to better bolster the signaling aspects of the Valuentum Buying Index (VBI). In our widely-read case study (see here), the VBI showed its ability to rank equity returns over a forward 12-month period, and we think a migration to less-frequent updating may make the most sense to better capture the forward-looking dynamics of the system. We think this will help weed out false breakouts and other noise that could be harmful. You shouldn’t think of … Read more