Highlights from the Peabody Report posted on AOL's Motley Fool AOL Board.
Peabody Model Trend Prediction: PFE reached a Peabody Valley and is headed higher to a new Peabody Peak.
Future News That Will Effect PFE:
-Viagra new Rxs and sales reports (IMS Report Due on Monday)
-PFE annual meeting (4/23/98)
-Valuation/ PE concerns
-Possible split announcement
-Big Pharma momentum
-General market corrections
Peabody Portfolio: +125.9%
Countdown: S-Day (Split Qualifying Day): -9 Days
Report Highlights: -New Pending Peabody Valley of 95 5/16 reached on 4/16/98
-After 7 months, Peabody Portfolio makes a new purchase
-Probability of split announcement in April lowered
The Peabody Report is intended to foster conversation on the PFEr Board.
Invest only after conducting your own research.
Have PFun!
BigKNY3
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The Peabody Report: 4/19/98
Peabody Model Trend Prediction
Based on historical PFE patterns, the Peabody Model predicts the following trend direction:
PFE reached a Peabody Valley last week and is headed higher to a new Peak.
Commentary
On March 8, 1998 ( PFE @86 1/4), this potentially classic The Peabody Report reversed its trend prediction and pforecasted a new Peabody Peak. The PForecasted Peabody Peak of 103.71 was surpassed by .04 on 4/06/98. Sorry for the miss!
Last week was a great example of how fast a stock can reverse and how you need to watch the news and the screen in today's market.
On Thursday morning, PFE 1st quarter earnings were OK not great, Big Pharma was being rotated out, MRK missed by a penny, and the profit-taking took over. PFE hit a Peabody Valley of 95.31 to 96.38 depending on your quote service. With Viagra Rxs soon to be released and CNBC pounding the table, the Peabody Portfolio finally made a new buy purchase. The end result a 9 point gain in two trading days.
As noted in previous Peabody Reports, major breaking market and Big Pharma news could impact PFE including; quarterly earnings reports, Viagra New Rxs and sales reports, Viagra in the media, market corrections, instability in Asia, and Big Pharma partnerships and merger mania.
Since it is based primarily on historical trends and Mr. Peabody "gut feels", the Peabody Model should always be placed in context of the market environments and anticipated news. As evidenced by the mythical Peabody Portfolio (see section below), the Peabody Model works particularly well for PFE investors with a "buy, hold, and buy more at the Valley" investing strategy. Prospective PFErs could consider investing 50% immediately and investing the
remainder at near Peabody Valleys.
Peabody Short-term PForecasts
Peabody Short-Term PForecast (4/12/98): PFE: 99.25, DJ: 8,995: This will be an important week for PFE...First quarter earnings and first reports of Viagra sales and patient reports. Although the general market direction may come into play, the good news concerning PFE is compelling even to the PE watchers.
Peabody Gut-Feel: This week could be the very last time to buy PFE below 100 (before the next split). I expect great news concerning 1st qt earnings due to Lipitor and Trovan (and many even the first Viagra sales report and the 2-1 split announcement). The Peabody Peak will be broken passing 105 in very heavy volume.
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Evaluation of Peabody PForecast: On Wednesday, the pforecast looked dead in the water. In two short days, sheer brilliance! Based on the correct call of a 6% weekly gain, a very big thumbs up!
Peabody PForecast Record (57 weeks): 37-20 (65%)
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Peabody Short-Term PForecast (4/19/98): PFE: 105.19, DJ: 9,168: Monday will be a wild day in PFErland with Viagra Rxs announced to the world. The Annual meeting of PFErs on Thursday will make news headlines on Friday.
Peabody Gut-Feel: Viagra and PFE have the mo! Shorts and sellers will not be happy. PFE will hit 110 before profit-taking comes back strong. Still should be an up and very volatile week.
Peabody Portfolio (+125.9%) PFE @ 105.19
ThePeabody Portfolio has more than doubled in less than two years. Current open market order is for 200 shares @ 95.25.
The mythical Peabody Portfolio consists of Mr. Peabody's 14 aggressive PFE purchase recommendations listed on the PFEr Board since August 14, 1996 . A total of 200 shares (100 shares pre-split) were purchased at each recommendation. The latest purchase was 200 shares @ $96.50 made on 4/16/98.
To date, the Portfolio has purchased 2,800 PFE shares at an average price of $44.98 (only 3.5% off the subsequent next PFE Valleys).
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# PFE Shares Purchased: 2,800
Average Price of Purchases: $44.98
Current Total Value: $294,525
Total Costs: $130,363
Total Profit: +$164,162
% Return: +125.9%
% Annualized Return: +109.7%
A history of the 13 PFE earlier purchases and background on Mr. Peabody can be found on the 9/06/97 Peabody Report located on the Pfizer Board.
Future Actions That Will Effect PFE
ED news in the media Throughout 1998
Asia, Iraq and Clinton news Throughout 1998
News of Trovan's acceptance Second quarter, 1998
Launch of Viagra April 7, 1998
Viagra Rx and sales trends April 20, 998
PFE Annual Meeting April 23, 1998
Possible split announcement April 23, 1998
AUA Meeting-presentation of Viagra data May 30-June 4,1998
FDA review of Zeldox June, 1998
European approval of Viagra September, 1998
Launch of Zeldox July, 1998
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Peabody S-Day Countdown
PFE has split three times in the last ten years ( 2/91, 6/95, and 6/97). The Wayback Machine indicates that PFE will announce a 2-1 split if PFE trade above 80 for 90 consecutive days. In the January, 1998 survey of 22 PFErs, only 43% felt that PFE will split in 1998.
As of December 31, 1997, 3.0 billion common stock shares have been authorized and 1.371 billion shares have been issued.
Here is an analysis of a possible PFE split in 1998.
Start of PFE 80s Streak: 1/28/98
# Days PFE has traded in the 80s: 81
# Days Remaining to Reach 90: 9
Possible Split Announcement 4/23/98 At the PFE Annual Meeting
Probability of a 2-1 split in April: 50%
Reason: Split announcement would have been made with 1st Qt Earnings Report. Expect PFE to ask for additional authorized shares at the annual meeting.
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Recent Peabody Short-term PForecasts
Peabody Short-Term PForecast (2/15/98): PFE: 83.63, DJ: 8,370 "Da Model" says down but the market says up. Big PFE and world news could hit any day. (Teaser Headline: News that could move PFE:Marketing partner for Searle's Celebra Cox-2 Antiarthritic). I expect PFE to circle around 80 to 85 for a bit in this short trading week. Still hoping to buy on weakness. Thumbs Up
Peabody Short-Term PForecast (2/22/98): PFE: 87.31, DJ: 8,4114: PFE has the Mo! The Celebra agreement has not been factored into PFE valuations yet. Moreover, the Viagra NDA approval could happen at anytime. Based on this MO, I expect PFE to set a new all-time high this week before profit-taking sets in...Thumbs Up
Peabody Short-Term PForecast (3/01/98): PFE: 88.50, DJ: 8,546: High probability that this is V month! Accordingly, any profit-taking will be short-lived. I expect high volatility until the FDA makes the big announcement. Gut-feel: PFE will trade in a wide range from 85 to 92. Be very alert for any buying opportunity, it could disappear within hours...Thumbs Up
Peabody Short-Term PForecast (3/08/98): PFE: 86.25, DJ: 8,569: The Peabody Model has reversed its course, PFE was ranked #13 in last week's sector growth, and V-Day is approaching... PFE will be on the move and break 90 next week....Thumbs Down
Peabody Short-Term PForecast (3/15/98): PFE: 86.00, DJ: 8,603: I believe this is the calm before the storm. The countdown has started. If the market environment is positive , PFE is headed higher. Expect a trading range of 85 to 89+. Thumbs Up.
Peabody Short-Term PForecast (3/22/98): PFE: 92.25, DJ: 8,906: Media excitement will bring PFE to new heights. Expect an order inbalance on Monday and a delayed PFE opening. However, PFE volume is indicating profit-taking will hit at any hour. Viagra's status has been known to the experts for months. As they said in Hill Street Blues, "Be careful out there". If the market turns south by 3-5%, PFE will follow the crowd. Gut feel: I expect one of the
wildest weeks in PFE history. With 20/20 momentum and the V-Day Countdown in single digits, PFE should break 95 +. However, at these levels, programmed profit-taking will take over and a quick reversal could happen. It will be a lot of pfun! Thumbs Up.
Peabody Short-Term PForecast (3/29/98): PFE: 95.75, DJ: 8,796: Viagra has received the most new product publicity in the history of the pharmaceutical industry...And the PFE marketing muscle was just released on Friday! At these levels, the PFE action will be fast and furious....Expect huge volume, profit-taking, discussions about a 2-1 split (the equivalent of receiving two $5 bills for a $10), concerns about PE levels, and ...a new Peabody Peak.
Gut feel: a big battle @ $100. Thumbs Up.
Peabody Short-Term PForecast (4/05/98): PFE: 101.88, DJ: 8,983: Momentum players and long-term investors are now supporting PFE. As noted last week, in the history of the pharmaceutical industry, no product has ever received as much media attention. Is it media hype or reality? Within three months, everyone will find out as the first RXs roll out of pharmacies. One other factor to watch is the general market. PFE and Dow are strongly correlated
(+.55). If the market heads south, PFE profit-taking will definitely happen. Peabody Gut-Feel: The Dow will break and hold 9,000 and PFE will surpass the target Peabody Peak of 103.71. Expect modest profit-taking until at least mid-April (1sr quarter earnings report). Thumbs Up.
Peabody Short-Term PForecast (4/12/98): PFE: 99.25, DJ: 8,995: This will be an important week for PFE...First quarter earnings and first reports of Viagra sales and patient reports. Although the general market direction may come into play, the good news concerning PFE is compelling even to the PE watchers. Peabody Gut-Feel: This week could be the very last time to buy PFE below 100. I expect great news concerning 1st qt earnings due to Lipitor and
Trovan (and many even the first Viagra shipment and the 2-1 split announcement). The Peabody Peak will be broken passed 105. Thumbs Up
Peabody Short-Term PForecast (4/19/98): PFE: 105.19, DJ: 9,168: Monday will be a wild day in PFErland with Viagra Rxs announced to the world. The Annual meeting of PFErs on Thursday will make news headlines on Friday. Peabody Gut-Feel: Viagra and PFE have the mo! Shorts and sellers will not be happy. PFE will hit 110 before profit-taking comes back strong. Still will be an up week.
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The Peabody Model (4/19/98)
A complete history of The Peabody Model can be found on the 9/06/97 Peabody Report located on the Pfizer Board. The updated major findings of the Model are as follows:
1. Since 1990, there has been a cyclical nature to PFE prices related to intermediate high PFE prices (Peabody Peaks) and intermediate low PFE prices (Peabody Valleys). For those engineers and math teachers out in cyberland, it looks like a sine curve that is consistently moving higher. Since 1996, the average increase from a Valley to Peak was +25.5%. The average decline from Peak to Valley was 12.7%, the risk when you purchase PFE at an all-time
high. The volatility of declines from Peaks seems to be lessening since 1993-1994:
# %
Peabody Average
Valleys Decline
1990 2 -20.3%
1991 0 -
1992 3 -15.8%
1993 4 -20.7%
1994 1 -24.5%
1995 2 -10.2%
1996 6 -12.1%
1997 5 -14.2%
1998 3 -9.1%
2. On Peabody Peak and Valley trading days, daily PFE volume is significantly higher than the average daily moving average. This volume effect usually lasts for 1-7 days. Moreover, there is a significant difference between the intraday PFE highs and lows for Peabody Peaks and Valleys as compared to average trading days. Note, there is more profit-taking at Peaks as compared to selling at Valleys. Here's the stats
Average Difference
Between Intraday Average
PFE High and Low % Difference
Average PFE trading day 1.60 2.8%
Average Peabody Valley 3.71 5.7%
Average Peabody Peak 4.63 4.6%
3. There is a direct relationship (correlation) between PFE and the general market (r=.55). As the market goes, so goes the direction of PFE. The minute by minute PFE price movement versus the Dow Jones almost always matches.
4. Only 20% of PFE's price movement is related to the PFundamentals of Pfizer. Approximately 50% is related to the Big Pharma environment (r=.76) and 30% is related to the general market direction. Since Big Pharma is also correlated to the general market, 80% of PFE movement results from pfundamentals that are not even related to the company.
However, price momentum and breaking PFE news (ie Viagra) could change this formula from 80%/20% to 65%/35%. For example, on 4/09/98, PFE had a growth rate of 33.1% as compared to 21.0% for Big Pharma (a 57.6% premium). Accordingly, the anticipated approval of Viagra may have had an incremental 10-15% positive effect on PFE.
5. Major pharm companies move together. Regression analysis has confirmed this group movement. PFE moves with SGP, BMY, JNJ MRK and ABT (all r>.50) and least like SBH, WLA, its Lipitor partner, AMGN, AHP, LLY,GLX and PU (r<.50).
As of 4/09/98, the major correlation relationships are as follows (greater relationships are indicated by higher positive numbers):
PFE PFE
Correlation Correlation
Factors Factors
Big Pharma .76 BMY .63
S&P 500 .57 SGP .67
Dow Jones .55 MRK .63
NASDAQ .39 LLY .44
ABT .56
JNJ .51
AHP .48
SBH .33
GLX .31
WLA .32
PNU .25
AMGN .20
VVUS .15
Other Model Correlations
DJ versus S&P .93
DJ versus NASDAQ .75
DJ versus Big Pharma .76 |
