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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (36246)	12/18/2009 4:44:26 PM
From: E_K_S	1 Recommendation Read Replies (3) \| Respond to of 78748

OK Paul - Thanks for the heads up on the Pharma. Pulled the sell order on SNY and will hold (Forward PE is low as you point out). Sold out of my JNJ to book my profit instead. Hedged my BMY selling June $27 covered calls. Will look to sell my LLY after their divi or at least hedge the position. The patent concern is a bit over done and is known by the market but one can get caught chasing the high dividend yields too. BMY is raising cash by selling their interest in Mead Johnson (their swap bid was over subscribed). They plan to use this cash to buy a biotech or pharma company w/ a big drug pipeline. LLY is a different case and I am now a bit concerned it might be a value trap. These drug and pharma companies are difficult to value. In the 90's anything with a PE <20 was a steal and now most of these companies sell at 10PE or less. I try to hold a basket of these companies and book my log term profits as they are generated. I like to re-deploy the funds when the news is bad or the sector is over sold (especially if I can buy at a PE <10). My portfolio only has 7% exposure to the pharmaceutical sector and I should probably build this up to 10%. I have not been very successful with my health care stock picks over the years and have concluded that many of the typical value measures just do not work. Experience has taught me to buy the larger companies that pay a dividend and book your long term profits from time to time. These companies can hit a land mine from a lawsuit, get whacked from new government legislation or enter into a stupid and/or expensive merger agreement. Many of these things do not benefit the long term shareholder. EKS

To: Paul Senior who wrote (36246)	12/21/2009 8:59:22 AM
From: E_K_S	Respond to of 78748

Sanofi-Aventis to Buy Chattem for About $1.9 Billion DECEMBER 21, 2009, 7:59 A.M. ET online.wsj.com From the article:...Drug maker Sanofi-Aventis S.A. said it has agreed to buy U.S. consumer health-care company Chattem Inc. for about $1.9 billion in cash in a deal it said would create the world's fifth-largest consumer health-care company..." ------------------------------------------------------------------ It looks like a 33% premium over Friday's close Chattem Inc. (CHTT) finance.yahoo.com Their offer is at 18x analysts estimated forward earnings. The price to sales is 4x ($458M/$1.9B) definitely NOT a "value" buy. Chattem, Inc., together with its subsidiaries, engages in the manufacture and marketing of over-the-counter (OTC) healthcare products, toiletries, and dietary supplements. This purchase is similar to JNJ's 6/2006 acquisition of PFE consumer health-care where they paid $16.6 billion. SNY's purchase is only 28% the size of JNJ's when adjusted for market cap and purchase price. EKS

To: Paul Senior who wrote (36246)	12/21/2009 1:04:52 PM
From: MCsweet	Respond to of 78748

BMY, I take it you didn't participate in the BMY tender into MJN. In my experience, those tenders usually work out pretty well. I have found that a 10% edge (although it ended up trading down to a 5% edge) usually works and is especially good if you are thinking about exiting the position anyway. My BMY shares convert to $27 worth of MJN shares as of current market prices. Who knows where it will end up by the time I get my MJN shares, but I'll take my chances. Sure, MJN is not a stock I'd normally own, but these tenders have pretty consistently made me money (basically an arbitrage type deal, but I go unhedged). MC