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Strategies & Market Trends : Dividend investing for retirement -- Ignore unavailable to you. Want to Upgrade?

To: gcrispin who wrote (6700)	12/5/2010 7:12:29 PM
From: chowder	Read Replies (1) \| Respond to of 34328

My health care plays are ABT and JNJ. I plan on adding to my ABT position later this month. If I were going to take another drug company, I think I would go with NVS. This from Morningstar's Dividend Investor newsletter: Novartis NVS Investment Thesis 11-29-2010 \| Damien Conover, CFA In an industry plagued by stagnant growth, Novartis emerges as a juggernaut with diversified operating platforms and an industry-leading number of new potential blockbuster drugs. Strong intellectual property supporting multi-billion-dollar products combined with a plethora of late pipeline products create a wide economic moat for the firm. Further, with the patent losses of hypertension drug Lotrel, fungal medicine Lamisil, and epilepsy treatment Trileptal in the rearview mirror, the company is poised for robust near-term growth. Novartis derives its strength from a diversified operating platform that includes branded pharmaceuticals, generics, vaccines, diagnostics, and consumer products. Although the majority of Novartis' competitors focus solely on the high-margin branded pharmaceutical segment, Novartis runs four complementary operations that reduce overall volatility and create cross-segment synergies. For example, not only does its generic business, Sandoz, serve to grab a portion of the billions of dollars in competitive branded products losing patent protection during the next 10 years, but it also extends the lifecycle of in-house products as patents expire. Also, the vaccine division (largely created by the 2006 acquisition of Chiron) offers the company a substantial footprint in an area where pricing power is increasing with innovative vaccines and fewer competitors. Further, the company's intentions to acquire a majority share of Alcon ACL in 2010 should greatly boost its consumer business with additional sales from the fast-growing eye-care business. The pharmaceutical segment is poised for growth driven by new pipeline products and existing drugs. Novartis differentiates itself from the pack because of the sheer number of potential blockbuster launches, including Lucentis for eye disease, Aclasta for osteoporosis, and Exforge and Tekturna for hypertension. Also, the company has generated a superior late-stage pipeline and should file several new products in 2010 in both the United States and Europe. Further, existing products should continue to perform well. Leading products (Diovan for hypertension and Gleevec for cancer) continue to post steady growth because of favorable efficacy in large therapeutic populations. The combination of relatively low near-term patent exposure and a diverse operating platform should translate into reliable growth during the next several years. Although the majority of the other pharmaceutical companies are struggling to increase the bottom line, Novartis offers stable footing on a path to favorable earnings growth. Novartis: Valuation We are maintaining our fair value estimate of $71 per share. Including Alcon, we project an average 6% annual sales growth rate during the next 10 years as Exforge, Tekturna, and other new product launches unfold. Additionally, several late-stage drugs targeting rare diseases could provide possible upside to our projections as these drugs tend to carry considerable pricing power. We expect a slight decrease in gross margins during the next ten years as the product mix shifts from high-margin pharmaceuticals to the lower-margin generic group, which should be partly offset by lower marketing costs. Additionally, the multiple operating segments should provide more stable and consistent growth versus a branded-only pharmaceutical company, such as AstraZeneca AZN. As a result we assigned an 8.5% cost of capital to the firm. If we increase our cost of capital by 100 basis points, our fair value estimate falls to $62 per share. Novartis: Risk Novartis, like all branded pharmaceutical firms, faces a number of considerable threats, including extended new drug approval times, pricing pressure from the managed-care industry, and political pressure to rein in drug costs. Also, increasingly aggressive generic drug companies are attacking patents on branded drugs several years before expiration dates. Further, following several acquisitions, the company faces integration risk in bringing together all of the business lines.

To: gcrispin who wrote (6700)	12/6/2010 4:41:13 PM
From: gregor	Respond to of 34328

>>I doubled my position in EXC this week. On Thursday when the market was up EXC was down, so I bought into the weakness. I'm not sold on the belief that the business cycle will rev up, so I'm looking for income. I currently own EXC, NGG, and VOD. << A pharmaceutical was on my next to buy list and after looking at Novartis, Astrazeneca, Merck, and Pizer and mulling about it an entire weekend I took your lead and bought my initial position in EXC. The last time they didn't raise the dividend this long was from Feb 05 to Nov 06 after which they raised 10% in 2007 and another 14% in 2008. I'm thinking of seeing what they will do in Feb 2011 and if they raise since this would be the corresponding quarter they should raise compared to the last cycle I will definitely hang on: if they don't raise I'll look at the new numbers. In the Sept 30th quarter they had a negative change in liabilities of 728 million. This would seem to indicate they have excess cash on hand to pay the bills and/or prepay liabilities. Would you have an explanation on that negative liability 728 million on the cash flow statement. Gregor