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Strategies & Market Trends : Value Investing

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From: E_K_S	12/21/2009 8:51:04 PM
	of 78751

Amgen Inc. (NasdaqGS: AMGN) and INTL BUSINESS MACH (NYSE: IBM) were mentioned today on Fast Money as stocks ready for a major break out LT "technically" to the upside. ( cnbc.com ) Oppenheimer’s Carter Worth chief market technician reviewed the 10 year chart for both stocks and pointed out that the current earnings estimates are multiple times higher than they were in 2002 but currently sell at the same price. According to Carter Worth, these stocks are ready to explode to the upside. . . . My response is they were probably over valued in 2002. I suspect a case can be made for both companies that they may be value buys at current levels. finance.yahoo.com Of the two I like AMGN the most. AMGN's forward PE is estimated at 11. The industry PE is 13. AMGN's historical growth rate has been 14%/year however for next year it has been lowered to 8%/year which is the industry average. If you adjust AMGN's next year's earnings (Dec 2010 estimate $5.14/share) to the industry average PE (industry PE 13, sector PE 13.8) AMGN should sell between $65.00/share - $70.00/share. Based on the current price of $56.00/share, the stock appears to be 16% to 34% undervalued. The case for IBM is a bit harder to make since I believe the the current PE of 13 and forward PE of 11 is a fair value. I would find this valuation more attractive if the company had a dividend payment that yielded more than the current 1.7%. INTL & MSFT have dividends that yield 3%. I sold HWP because of their high PE (around 16) and low dividend yield (.5%). IBM would be a value buy to me if they doubled their dividend payment to $4.40/year which would yield 3.4%. --------------------------------------------------------------- Does anyone have an opinion on AMGN or IBM at current prices? I will put AMGN on my watch list. $53.00/share might be a good entry point. EKS

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