Stocks in the News: Valeant, Gilead, Google

Posted: Apr 30, 2013 12:01 AM

Welcome to John Ransom's Stocks In The News, where the headline meets the trendline.

Stocks in the News is produced by Ransom Notes Radio and Goodfellow, LLC. Crista Huff manages Goodfellow LLC, a website that recommends outperforming stocks using fundamental and technical analysis.            

Stock number one is:

Valeant Pharmaceuticals and Actavis Inc., (SYMBOL: VRX, ACT) and the headline says:  Merger of drugmakers Valeant, Actavis on hold  (Reuters)

Talks of a $13 billion acquisition of Actavis Inc. by Valeant Pharmaceuticals are currently on hold as both sides spar over pricing.        

Valeant is a rapidly growing specialty drugmaker, in the areas of dermatology, neurology and ophthalmology.  Valeant’s earnings are expected to grow 24% this year, and the PE is 13.6.      

Actavis develops and markets generic and branded pharmaceutical products.  Its earnings are projected to grow 35% this year, then slow dramatically thereafter.  The PE is 12.9.  Based on earnings growth and chart patterns, …        

Our Ransom Note trendline says:  BUY VALEANT PHARMACEUTICALS and HOLD ACTAVIS.

VRX Chart

VRX data by YCharts

Stock number two is:   

Gilead Sciences Inc. and Bristol-Myers Squibb Co., (SYMBOL: BMY, GILD) and the headline says: Gilead-Bristol Hepatitis C Drug Combo Cures All in Study (Bloomberg)       

A combination drug therapy for Hepatitis C has cured 100% of patients in a clinical trial.  The treatment is unlikely to be approved by government agencies because Gilead Sciences and Bristol-Myers are not in joint pursuit of a late-stage study.  However, it is  expected that doctors might pursue off-label therapy for their patients.        

Gilead Sciences develops therapies for immune deficiency, cardiovascular, and respiratory problems.  Earnings are projected to grow 4%, 42%, and 48% over the next three years.  The PE is 25. The stock price is up a tremendous amount and probably needs to experience a pullback.  Shareholders should use stop-loss orders.  

Bristol-Myers is a global pharmaceutical company with $17 billion in revenue.  The company is profitable, but lacks consistent growth of revenue and income.

Our Ransom Note trendline says: HOLD  BRISTOL-MYERS and HOLD GILEAD SCIENCES.    

GILD Chart

GILD data by YCharts

Stock number three is:

Google Inc., (SYMBOL: GOOG) and the headline says:

Motorola Buy Delivers Google More Heartbreak Than Help  (Bloomberg)

“Google Inc.’s $12.4 billion purchase last year of mobile-phone pioneer Motorola Mobility Holdings, partly for its trove of more than 17,000 patents, is showing signs it wasn’t much of a bargain,” reports Bloomberg. 

Myriad patent lawsuits are not reaping the cash rewards that Google expected, and have also exposed Google to increased anti-trust scrutiny.  The biggest benefit of the patent acquisitions thus far is that they aren’t owned by a competitor.  

Despite Motorola’s drag on profitability, Google is expected to increase earnings 16%-18% per year over the next three years.  Google has $48 billion in cash-on-hand, and can therefore easily weather the storm with the Motorola Mobility acquisition. The stock is currently trading between $760 and $840.

Our Ransom Note trendline says: HOLD GOOGLE INC.

GOOG Chart

GOOG data by YCharts

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