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CNN.com
Dec 13, 2006 1:03:21 GMT -4
Post by Conrad Alvin Lim on Dec 13, 2006 1:03:21 GMT -4
Investing after Pfizer's flop - 3 strategies Despite the failure of Pfizer's new drug, there are still attractive strategies for health care investing - from sector funds to J&J. By Michael Sivy, Money Magazine editor-at-large December 5 2006: 8:13 AM EST
NEW YORK (Money) -- Pfizer's decision to suspend tests of its latest drug for the treatment of high cholesterol underscores the key problem facing most large pharmaceutical companies. Once a drugmaker has reached a certain size, it's an enormous challenge to generate new blockbusters fast enough to maintain a high growth rate.
And there's another hurdle to get over. A number of billion-dollar drugs will lose patent protection during the next few years. And the companies that produce such brand-name products often don't have enough drugs in the pipeline to replace them.
Pfizer, in particular, is facing the loss of patent protection for Lipitor, a cholesterol treatment that is the world's best-selling drug with revenues of more than $12 billion a year.
Pfizer has already announced that it would cut one-fifth of its U.S. sales force to lower costs. But the fact is, it and other industry leaders will only be able to grow earnings if they can find enough new products.
Does that mean that health-care investing is finished? Not at all. The basic case remains as compelling as ever.
The Baby Boom generation is retiring and will soon be suffering from chronic ailments that are best treated with drugs. In addition, even the most expensive pharmaceuticals are a bargain if they prevent or forestall the need for more expensive hospital treatment.
The pharmaceutical industry is also one of the world's most important growth industries - and one that the U.S. dominates.
There's no doubt that there's plenty of money to be made in the drug business. The question is what the best investing approach may be. Three smart strategies
Obviously, large pharmaceutical companies will have to concentrate on controlling costs and trying to boost the success rate of their research ventures.
But they also need to diversify their product mixes as broadly as possible and acquire successful mid-size drugs as well as blockbusters.
That means that pharmaceutical giants will be likely to buy promising products. By merging with each other or acquiring smaller firms, a company can ensure that its sales force will have a bigger selection of products to sell.
This outlook suggests that investors might not want to pick individual stocks but rather invest in the industry as a whole. It's clear that there's money to be made and that the industry will eventually figure out how to be successful again. If you invest in the entire sector, you won't have to worry which companies turn out to be the biggest winners.
Two big families of exchange-traded funds offer pharmaceutical ETFs. Among Spiders, there's SPDR Pharmaceuticals (XPH). And among iShares, there's Dow Jones U.S. Pharmaceuticals (IHE). Both ETFs are only about six months old and so far have assets of less than $100 million. But they've been performing well.
A second strategy is to invest in generic drug makers. These companies produce copies of popular drugs that have lost their patent protection. Because generics are much cheaper than brand-name products, they will gain market share as more drugs come off patent. In addition, analysts expect the Democratic Congress to promote the use of generics to help hold down growth in health-care costs.
The world's largest generic pharmaceutical maker is Teva Pharmaceutical, based in Israel. But even though Teva is projected to have strong growth over the long term, earnings are projected to decline slightly next year and the stock doesn't appear to be timely.
An alternative to Teva is Barr Pharmaceuticals, a U.S. generics producer with annual sales of more than $1 billion. The stock is widely recommended by analysts. And at a current $51, the shares trade at just over 15 times earnings for the coming year. Compound annual growth is projected at more than 15 percent.
If you want to stick with large, established companies, such as those included in the Sivy 70, a third strategy is to buy a widely diversified company like Johnson & Johnson. In fact, superstar investor Warren Buffett was loading up on J&J last year at prices not far below today's.
Not only is J&J one of the most diversified health-care companies, with a wide assortment of consumer products and professional items as well as brand-name drugs, but the company's track record is extremely solid. In fact, Johnson & Johnson has raised its dividend for 44 years in a row.
Growth over the next five years is projected to average at least 10 percent annually. And at a current $66.28, J&J yields a healthy 2.3 percent and trades at 16.3 times projected earnings for the coming year.
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CNN.com
Feb 26, 2007 4:08:47 GMT -4
Post by Conrad Alvin Lim on Feb 26, 2007 4:08:47 GMT -4
Wall Street eagerly awaits Buffett's annual letter Every year, the legendary investor's missive offers valuable insight into current market conditions. CNN: February 25 2007: 12:49 PM EST
NEW YORK (Reuters) -- Warren Buffett, who last year generated a 24 percent return for Berkshire Hathaway Inc. shareholders, may this week tell investors and followers to lower their sights for 2007.
"That's his nature, to underpromise and overdeliver," said Whitney Tilson, who invests $150 million in hedge fund capital at New York's T2 Partners LLC. Its top holding is Berkshire.
Buffett's annual missive to Berkshire stockholders may be Corporate America's most eagerly awaited shareholder letter.
Accompanying Berkshire's annual report, the letter offers trenchant, plain English, and often funny assessments of Berkshire businesses, and issues facing companies and the economy. Buffett even admits his own mistakes.
This year, Buffett will release the letter Thursday after U.S. markets close, not on a Saturday morning as in prior years, Berkshire representatives said.
That's because a new rule requires big U.S. companies to file annual reports with securities regulators within 60 days after their fiscal years end. Day 60 for Berkshire is March 1.
"I'm going to miss my Saturday morning coffee with the report," said Glenn Tongue, like Tilson, a T2 managing partner.
Known as the Oracle of Omaha, Buffett has transformed Berkshire since 1965 from a failing textile company into a $165 billion conglomerate by buying out-of-favor companies with strong management and businesses, and investing in stocks.
Its 50-plus companies sell such things as Dairy Queen ice cream, Fruit of the Loom underwear and Geico car insurance - the latter now advertised by talking geckos and Little Richard.
Among Berkshire's equity holdings are Coca-Cola, Procter & Gamble, Wal-Mart Stores and Wells Fargo.
Berkshire Class A shares closed Friday at $106,800 each. Tongue expects book value per share to top $70,000, equivalent to 17.5 percent growth.
Buffett, 76, is the world's richest person after Microsoft Chairman Bill Gates.
Last year, Buffett won wide praise by donating much of his wealth to the Bill & Melinda Gates Foundation.
But last week he took heat for investing in PetroChina Co. amid criticism that company's parent supports Sudan's government, which the United States accuses of genocide. Improved results
Overall Berkshire results likely improved because last year's dearth of hurricanes, in contrast to Katrina and other storms a year earlier, meant lower insurance payouts.
Analysts polled by Reuters Estimates on average expect full-year profit per share, excluding investments, to rise 72 percent to about $8.62 billion, or $5,588 per Class A share.
Fourth-quarter profit per share may have risen 18 percent to $2.17 billion, or $1,410 per share, estimates show. Insurance usually generates more than half of overall profit.
"Berkshire was willing to write significant numbers of policies at attractive prices after rivals pulled out because of losses from Katrina, Rita and Wilma," said Keith Trauner, who helps invest $5.5 billion at Fairholme Capital Management in Short Hills, New Jersey, including 20 percent in Berkshire. "It has better underwriting standards than just about anyone."
In last year's letter, Buffett said: "We are quite willing to accept huge risks ... Whatever occurs, though, Berkshire will have the net worth, the earnings streams and the liquidity to handle the problem with ease."
Acquisitions may also have bolstered results. Berkshire's 2006 purchases included utility PacifiCorp, press release distributor Business Wire, apparel maker Russell Corp. and Israel's Iscar Metalworking Cos. The succession issue
Yet the big purchase has been elusive. Berkshire ended September with $42.25 billion of cash - which could generate more than $2 billion of annual interest at current rates.
"Buffett has said he'd rather do nothing than do something stupid," said Chad Kane, president of WoodTrust Asset Management in Wisconsin Rapids, Wisconsin, which invests $900 million and owns Berkshire stock.
Tilson added that it is tougher to buy when private equity firms and others "have enormous amounts of equity capital, combined with even larger amounts of low-cost debt capital."
Buffett may use his letter to rail again against U.S. budget and trade deficits. The latter rose 6.5 percent last year to a record $763.6 billion.
Berkshire in 2002 began betting the dollar would fall, a good bet, though it slashed its stake in foreign currency contracts to $1.1 billion by September from $13.8 billion in Dec. 2005.
Buffett in last year's letter also said Berkshire's board had picked his successor - whom he did not name - from three internal candidates, should he die or become incapacitated. Yet Buffett has repeatedly said he loves his job.
"I expect Buffett to run this company for another 10 years, and the successor could change," Tilson said.
Until then, Buffett's annual letter will command attention.
"It's always a great read," Kane said.
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CNN.com
Apr 6, 2007 22:05:35 GMT -4
Post by Conrad Alvin Lim on Apr 6, 2007 22:05:35 GMT -4
Jobs much stronger than expected Growth in payrolls well above forecasts, unemployment rate drops; Fed seen on hold. April 6 2007: 9:45 AM EDT
NEW YORK (CNNMoney.com) -- Job growth jumped and unemployment dipped unexpectedly in March, the government reported Friday, signs the labor market is holding up better than economists had thought.
Employers added 180,000 jobs to payrolls last month, the Labor Department reported, up from 113,000 in February, which was also revised higher. Economists surveyed by Briefing.com had forecast a gain of 135,000 while Reuters' survey showed a consensus for 120,000.
The unemployment rate dipped to 4.4 percent - the lowest since October - from 4.5 percent in February. Economists had bet the rate would creep back up to 4.6 percent. October and March are the only two months since May 2001 that unemployment has been this low. The unemployment rate for college graduates is down to 1.8 percent.
"I think this is really encouraging. It shows that employers were in a hiring mode," said Rich Yamarone, director of economic research at Argus Research. "We're not going to have blistering job growth. But the nation is (essentially) at full employment."
Manufacturing was one of the only sectors showing weakness, losing 16,000 jobs last month. Even the battered automotive sector saw employment levels remain essentially unchanged. Professional and business services lost 7,000 jobs.
But construction, which many had feared would show a seasonally adjusted decline due to continued slowdown in home building, picked up, adding 56,000 jobs.
There was some weakness in residential construction, as home contractors trimmed 1,200 jobs, but the subcontractors they employ added 11,000 jobs.
Retailers added 36,000 jobs despite weakness at auto dealers, furniture stores and building material stores, all hurt by the troubled auto and housing markets. But department stores, clothing retailers, electronics chains, groceries and gas stations added jobs.
Average hourly wages rose 0.3 percent to $17.22, in line with forecasts and down from the 0.4 percent increase posted in February.
That left wages up 4.0 percent over the last 12 months, meaning typical hourly workers are seeing their paychecks grow faster than prices. A separate Labor Department reading shows a 2.4 percent increase in prices in the 12 months ending in February.
Friday marked the rare holiday release of the government's most closely watched economic report. Stock markets in the U.S. and Europe are closed for Good Friday, giving investors more limited ability to react to the number.
But the bond market was open, and Treasury bond prices tumbled, taking the yield on the 10-year note up to 4.74 percent from 4.67 late Thursday as investors bet the strong numbers significantly reduced the chance that the Federal Reserve would cut interest rates later this year.
Yamarone said that even with the unemployment rate falling and wages continuing to creep up, he doesn't believe the Fed will feel a need to raise rates at any point in 2007, and it certainly won't cut rates.
"The inflation barometers are all exceeding their comfort zone, but they're not upending the economy," he said.
Employers added jobs at a faster pace in March, according to the government's latest reading of the labor market that came in much stronger than forecasts.
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CNN.com
Apr 6, 2007 22:19:46 GMT -4
Post by Conrad Alvin Lim on Apr 6, 2007 22:19:46 GMT -4
Stocks set for big week Strong jobs report Friday could see stocks fully recover from February's big sell-off; earnings, consumer sentiment on tap. April 6 2007: 2:10 PM EDT
NEW YORK (Reuters) -- Stocks should complete the last leg of their recovery from February's big sell-off next week as Friday's surprisingly strong job growth data calms investor concerns about the outlook for the economy and consumer spending.
The next question is whether U.S. stocks can then take the step and recapture the record levels from two months ago. That will hinge on the corporate profits picture, which begins taking shape next week as the first of the market's bellwethers deliver first-quarter earnings reports.
"Unless we see a more significant drop in profit margins than the market might be expecting, the trend will probably be higher," said Brandon Thomas, chief investment officer at Envestnet Asset Management in Chicago.
While the number of scheduled earnings releases is not large, investors will see results from Dow industrials components Alcoa Inc. (Charts) and General Electric Co. (Charts), both seen as important indicators of the condition of the global economy.
Alcoa, the world's largest aluminum producer, reports Tuesday, and GE, whose operations range from heavy industry to media and international finance, will announce results Friday.
Stock markets had a holiday Friday ahead of the Easter weekend, but in their absence the Labor Department reported 180,000 jobs were created in March, far more than expected, while job growth figures from January and February were revised upward. The unemployment rate fell to 4.4 percent from 4.5.
The news sent bond yields soaring to seven-week highs, and Fed fund futures showed a diminished likelihood of a Federal Reserve benchmark interest rate cut any time soon.
"The figures inflicted a sharp blow to the view that the economy deteriorated in the aftermath of the February 27 stock market adjustment and emergence of subprime (mortgage sector) woes," said Michael Englund, chief economist at Action Economics in Boulder, Colorado.
U.S. stock index futures, which did trade Friday, also soared on the payrolls data, suggesting that Monday's opening bell could bring significant gains.
Barring any unpleasant surprises through the rest of the weekend, the only thing standing between stocks and a full rebound from the Feb. 27 global sell-off would be a big let-down from these two blue chips.
"GE is a bellwether stock, particularly in this type of market," Thomas said. "If the earnings are relatively strong, and I think there are indications a couple of divisions are doing quite well, then that bodes well for the market."
By Thursday's close, stocks were just a whisker from their Feb. 26 closing levels, the day before stocks tumbled around the world after a 9 percent drop in Chinese stocks provided a catalyst for a flight from risky assets.
According to Reuters Estimates, of 24 Standard & Poor's 500 companies that have already reported quarterly earnings through March 30, 75 percent beat estimates, 8.3 percent have missed, and 16.7 percent matched estimates.
"People have been shrugging off the concerns that sparked the move down in late February," said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.
"The subprime (mortgage) market debacle has for the most part been shrugged off by equity investors, and we're almost back to where we were when the move down started," he said.
For the past week, the blue-chip Dow Jones industrial average rose 1.66 percent and the broad Standard & Poor's 500 index gained 1.61 percent. The Nasdaq Composite Index rose 2.05 percent.
Several polls of consumer sentiment are on the week's agenda, including the ABC/Washington Post weekly consumer comfort index Tuesday and the Reuters/University of Michigan Surveys of Consumers due Friday.
The Reuters/University of Michigan consumer sentiment index is expected to fall to 87.5 in April from 88.4 in March, according to the median forecast in a Reuters poll of economists. The March figure was the lowest since 85.4 in September 2006.
Consumer sentiment can be hurt by rising prices. Wall Street gets a look at March producer prices, also Friday.
According to the Reuters poll, economists expect a 0.7 percent rise in prices overall, and a 0.2 percent rise excluding volatile food and energy. In February, the overall number was up 1.3 percent; excluding food and energy, producer prices rose 0.4 percent.
Further signs of consumer activity will be coming in the March sales reports from retailers Thursday.
On Friday, the Commerce Department reports on global goods and services trade for February. According to the Reuters poll, the U.S. deficit is expected to rise slightly to $60.0 billion from $59.1 billion in January. The January deficit was a decline from December.
Axel Merk, manager of the Merk Hard Currency Fund, says that as the U.S. economy slows, smaller trade gaps are to be expected because imports fall. In fact, January saw imports falling and exports rising.
"I think the trade deficit will be better behaved, but, having said that, it's not necessarily good news," Merk said.
Fed watchers get to study the minutes of the March policy meeting, which are due to be released Wednesday. At that meeting, the Fed left short-term rates unchanged at 5.25 percent but altered some of the wording in the accompanying statement.
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Post by Conrad Alvin Lim on May 7, 2007 0:32:15 GMT -4
Keeping the bull running The Dow has seen its longest run of gains in nearly 80 years. Can it continue in the week ahead as investors mull earnings, inflation news and the next Fed meeting?. By Alexandra Twin, CNNMoney.com senior writer May 6 2007: 9:20 AM EDT
NEW YORK (CNNMoney.com) -- Earnings, mergers and supportive economic news have been powering the stock market in recent weeks, and there's not much in the week ahead to suggest an end to the advance.
The Federal Reserve meeting Wednesday is the big highlight of the week. But with Ben Bernanke and the central bankers expected to hold interest rates steady and keep mum about any possible future rate cuts, Fed Day may not have as much sway as it often does.
The last of the earnings trickle in this week with Cisco, Walt Disney, Toll Brothers, Viacom and a few others. However, the bulk of the first-quarter results have already been reported, have easily trounced estimates, and have made all the dour predictions of a big earnings slowdown look a bit overwrought - at least for the first quarter.
So what's likely to keep the advance going next week, or at least stem any profit-taking selloff? Momentum and liquidity, mixed with a healthy splash of skepticism.
"There's still a lot of money on the sidelines just waiting for minor dips to step in," said Fred thingyson, chief market strategist at D.A. Davidson & Co. "The earnings have been strong and merger mania seems to be the rule of the day." Buyouts: hotter than ever
But are investors too optimistic right now to notice the warning signs?
Missives from the housing market continue to distress, the dollar's plunge to record lows against the euro is good for big multi-national companies but not necessarily for others, and the pace of the economic slowdown remains in question.
Sure the earnings were decent - with 81 percent of the S&P 500 having reported, earnings are on track to have risen 8.1 percent from a year ago, according to the latest Thomson Financial estimates. That's better than the 3.3 percent expected on April 1, but still marks the slowest quarter of earnings growth in more than 3-1/2 years.
Yet, the sentiment is positive enough right now that investors were able to take Friday's April jobs report - which showed the smallest monthly payrolls growth in more than two years - and turn it into a positive.
Stock and bond investors seemed to bet that the slower April payrolls growth - paired with signs of lower wage inflation also within the report - means the Federal Reserve is likely to lower rates sooner than it is to raise them.
However, not next week.
Next week, the central bank is widely expected to keep the Fed funds rate, a key overnight bank lending rate unchanged at 5.25 percent for the seventh meeting in a row.
The board members are likely to see the jobs report as backwards looking, said Joshua Shapiro, chief economist at Maria Fiorini Ramirez Inc. That's especially the case since strong reports on manufacturing and factory orders released earlier last week suggested that the labor market is only one piece of the growth picture.
As always, the accompanying statement will be of greater concern to investors.
"They'll talk about the recent mixed data and say that they are still concerned about inflation," said Shapiro. "But I don't think the bias statement will have any surprises."
"The bottom line is that people won't view the statement as implying they are going to move one way or the other," he said.
In terms of other economic news due during the week, retail sales and the Producer Price Index are on tap, but not until the end of the week.
Jobs growth not slow enough to prompt rate cut
Stocks ended last week at 2007 highs, with the Dow Jones industrial average closing at a record for the 7th out of 8 sessions as part of a longer winning streak. The Dow has now closed higher for 23 out of the last 26 sessions, the longest upward run since the summer of 1927, according to Dow Jones.
The S&P 500 is within reach of its all time-high of 1527.46 hit in March of 2000, right near what would prove to be the top for the late 1990's tech boom-fueled run.
The Nasdaq composite, though far from its tech boom-fueled high of 5048.62, also hit in March 2000, is doing just fine too. The tech-driven index ended last week at its highest point since February 2001.
And the Russell 2000 small-cap index sits just below an all-time high.
After a big rally, a pullback is pretty typical, and the stock market could experience that as investors move into the typically slow and shaky summer months on Wall Street.
But in the short term, there is still enough worry about the eventual pullback that it can probably be avoided a bit longer, said Todd Salamone, director of trading at Schaeffer's Investment Research. He said that from a contrarian point of view, stocks can continue to climb the "wall of worry" that Wall Streeters often refer to.
"Even though the earnings have been positive and have driven the market over the short term, I don't think it changes the immediate outlook, which is cautious," Salamone said.
He pointed to technical stats that Wall Street professionals look at, as well as the fact that investors have been pulling money out of stock index funds for five weeks straight, even as the market has been going up.
"There's a cautionary tone in the middle of strong price action and strong earnings," Salamone said. "And that's bullish."
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CNN.com
May 13, 2007 9:29:48 GMT -4
Post by Conrad Alvin Lim on May 13, 2007 9:29:48 GMT -4
Wall Street: Rally keeps rolling Stocks appear to be headed for more gains in the week ahead - if investors don't get spooked by the housing and inflation news. By Alexandra Twin, CNNMoney.com senior writer May 13 2007: 7:40 AM EDT
NEW YORK (CNNMoney.com) -- Bad news, good news, mediocre news. It doesn't seem to matter much to stock investors these days, as the latest leg of the bull run soldiers on.
Economic growth is at the slowest pace in four years, you say? Home prices are expected to end the year lower for the first time ever? First-quarter earnings growth is at a 3-1/2 year low? Iran won't halt its nuclear program?
All that is cause for concern. Apparently, just not for stock investors.
Since bottoming in late February, stocks have been on the rise as investors have welcomed surprisingly decent first-quarter earnings, the wave of merger and buyout news, and a bevy of corporate stock buyback plans.
Last week, the Dow Jones industrial average and the Russell 2000 small-cap index both hit record highs yet again, while the S&P 500 rose to within 18 points of its all-time high. The Nasdaq hit a new 6-year high.
The uptrend that has lifted stocks of late is unlikely to peter out in the week ahead, even as investors take in potentially alarming reports on housing and inflation.
Housing and inflation - because of whatever impact they might have on the economy and Federal Reserve policy - are "the two biggest areas of the economy that separate economists right now," said Michael Sheldon, chief market strategist at Spencer Clarke.
As such, the focus this week will be on the April housing starts and building permits reports, due Wednesday; and, the Consumer Price Index (CPI) and so-called core CPI, due Tuesday.
Other reports due in the week include manufacturing in the New York and Philadelphia regions, consumer sentiment and the index of leading economic indicators.
Upbeat reports would reassure investors. But even reports that suggest some economic weakness would probably be received well by the stock market, if the recent 'all news is good news' attitude prevails.
That was certainly the case Friday when stocks rose despite a weak April retail sales report.
Why? Because Friday's session also brought a mild inflation report, right after the Federal Reserve said its main worry is still inflation. So the stock market bet that weak retail sales, a.k.a. slower economic growth, means the Fed is more likely to cut rates by the end of the year than raise them.
A number of Federal Reserve officials are due to speak this week, including Chairman Ben Bernanke on Tuesday and Thursday.
In addition to economic news, a few companies report earnings during the week, including Hewlett-Packard, Home Depot and Wal-Mart Stores.
There are "fundamental reasons" why the stock market would seem to be due for a big pullback right now, but it's just not happening, said Paul Levine, president at Lifetime Financial Services.
He said that's largely because any negatives are being tempered by the substantial amount of money pouring into the market.
"Between the incredible amount of M&A activity and corporate stock buybacks, there's just so much liquidity out there," Levine said. "And that's lifting stocks."
First-quarter earnings are currently on track to have risen over 8 percent from a year ago, according to the latest Thomson Financial estimates, versus forecasts for a rise of 3.3 percent just over a month ago.
Meanwhile merger and acquisition activity year-to-date is currently 65 percent ahead of where it was at this point in 2006, according to a recent Standard & Poor's report. That doesn't look to ease up anytime soon.
However, that isn't to say there won't be more selloffs in the next few weeks, particularly as the market moves into the typically choppy summer period, when bulls tend to be more preoccupied with the beach than making big changes to their portfolios.
Wall Street has already had its share of down days over the last few months, following the occasional big earnings disappointment or surprisingly hawkish comment from a Federal Reserve official.
But the declines have been short lived, with investors using the selloffs as a reason to get back into the market at lower levels.
That trend is likely to continue, at least in the short term. "I don't think we'll see a big pullback," said Steven Goldman, market analyst at Weeden & Co. "I think we'll continue to be supported with people buying on the dips."
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