| Stock (Symbol) | Stock Price | |
Actavis (ACT) |
$227 |
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| Data is as of | Expected to Report | Sector |
February 27, 2014 |
Apr 28 – May 02 |
Healthcare |
| Sharek’s Take | ||
 Actavis (ACT) is having the time of its life right now. Actavis used to be named Watson Pharmaceuticals. I remember Watson from my stock research years ago. I liked it because profits were growing fast and the stock had a low P/E. But the P/E ratio was low due to the company being a generic drug company. Generic drug stocks typically get lower P/E ratios because they really aren’t creating the branded drugs that bring in big profits. They just copy branded drugs, and other generic drug companies can do that. Also, generic drug companies depend on branded drugs coming off patent. If there’s a lot of this happening — as there is now — then profits go up. In November 2012 Watson acquired Switzerland based global generic drug company Actavis and kept its name. But the big boost came after ACT acquired Warner Chilcott in October 2013, and reincorporated in Ireland which has a lower tax rate. Now ACT’s “deal” is it can acquire other companies and profit handsomely because it absorbs the acquisition into a lower tax bracket. I will add ACT to the Growth Portfolio today. |
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| One-Year Chart | ||
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| Earnings Table | ||
 Profit growth was 75% last quarter on an impressive 40% increase in sales, but ACT gets a lot of its growth off acquisitions.Acavis beat the street by 12 cents last qtr, but has an erratic history of beating the street. Annual Profit Estimates are rising now, but in the next few years patent expirations are expected to slow. And that will probably slow profit growth. That is unless ACT can acquire other drug companies and boost profits that way. Quarterly profit growth looks exceptional for the next two qtrs and the figures just increased. |
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| Fair Value | ||
 I think Wall Street has a new appreciation for Watson…I mean Actavis…and the P/E is on its way to 20. There’s good upside this year and next. Would be nice to make 50% on this stock by next year. |
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| Ten-Year Chart | ||
 Look at that long base from 2006 to 2010. This stock didn’t do anything even as profits expanded rapidly. The stock really jumped last year and I think now ACT management will milk this Ireland tax bracket thing to merger more. |
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| Power Ranking | Bottom Line | |
Growth Portfolio
16 of 25 |
Actavis is having the time of its life right now. Generics sales are good and it just merged with Forest Labs which will give it more growth opportunity. Still, this is a generic drug company and they typically don’t get high P/Es. ACT is raked 16th in the 25 stock Growth Portfolio Power Rankings. I don’t think this is a life-altering company and thus won’t add it to the Aggressive Growth Portfolio. |
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Aggressive Growth Portfolio
N/A |
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I should have had you in this stock last year, but I didn’t track Watson because it didn’t go anywhere for much of the last decade. Still even at these highs the P/E is a reasonable 