Article by Investment U
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Big pharma is desperate for new revenue sources, two stalwarts of large-cap dividend payers just got better, and the SITFA.
Big Pharma M&A Heating Up
Two of the biggest names in big pharma just paid a 95% premium. That means they paid a price 95% higher than what other stock buyers were willing to pay for it.
Bristol-Myers (NYSE: BMY) and AstraZeneca (NYSE: AZN) are buying Amylin for $7 billion to get access to their diabetes drug, and, in a very complicated set up, Eli Lilly (NYSE: LLY) and Bemis Company (NYSE: BMS) are also tied into the deal.
The amazing part of this is Amylin was selling for as little as $8 a share last fall. It’s about $30 now, at its 52-week high.
Driving this kind of crazy buying is the fact that the big pharmas are losing patent protection on their top-producing drugs and are in a mad scramble to secure patents from smaller companies to generate revenue down the road.
Add to the mix the fact that Novo Nordisk (NYSE: NVO) and GlaxoSmithKline (NYSE: GSK) are both working on similar drugs to what Amylin has to offer, and this looks like a very questionable move, at best.
This is hardly a technical analysis of the situation, but it looks like panic buying to me. Paying that much of a premium for anything doesn’t look like good decision making to me.
When you consider the long-term track record of buyouts, and mergers and acquisitions, from a real profit perspective (which hasn’t been all that good), this has all the feel of a bad move for both companies.
I’d keep my distance from this one until the dust settles and we see just how profitable this move really is. When you look at all the mergers and buyouts involving the four companies in this one, it also smells like anti-trust issues to me.
Two Large-Cap Dividend Payers You Can Really Sink Your Teeth Into
Johnson & Johnson (NYSE: JNJ) and General Mills (NYSE: GIS), two of the really big and boring boys on the block, but both have lots of reasons to get very close to them.
GIS recently raised its dividend 8% to $.33 a share; it has raised it 13 times in the last eight years and has been consistently paying a dividend since 1898.
This big cap is making all the right moves.
A recent Barron’s article listed its five-year annual return at around 14% and S&P has a strong “Buy” on it. It has completed a $313-million share repurchase and recently expanded its reach into Latin America with its acquisition of Yoki Alimentos, a Brazilian food manufacturer.
There is almost nothing not to like about this one.
And right behind it, Barron’s was also singing the praises of JNJ, who has been kind of a lagging performer of late, but the recent Barron’s article gave lots of reason to give this one a new look.
The recent acquisition of Swiss medical device maker Synthes will, according to Barron’s, add immediately to the bottom line. This, a new CEO, and a string of recent new drug launches sets JNJ up as a strong growth and income player.
It has a 3.7% dividend and Raymond James called it “a warm blanket in a cold environment.
JNJ has 100 subsidiaries that sell everything from shampoo to cancer drugs. It has an AAA bond rating, a “Buy” and an overweight rating form JP Morgan and Jeffries.
There’s absolutely no reason to play around with questionable drug company moves when you have these two to choose from.
Finally, the SITFA
This week it goes to those people who are actually betting, they call it investing, in the outcomes of poker tournaments.
That’s right!
The big Texas Hold’em tournaments, that have been getting prime time billing on some cable networks, have hit the big time. There’s now a tournament that has a $1-million entry fee.
You heard me, $1 million just to play.
Well, since few poker players have a million dollars to plunk down, they have been soliciting investors, you heard me, investors to back them and pay the entry fee.
One 28-year-old player, a Noah Schwartz, according to the Journal, has raised $900,000 from investors.
The players, depending on which deal you’re looking at, get 25% to 60% of the winnings, and the payoffs are in the millions.
But come on, calling this investing? The odds here make options and micro-cap stocks look like widow and orphan investments.
I don’t know about you, but money is too hard to come by, even in good times, to get involved in this kind of craziness.
I wonder if their agreements prohibit drawing to an inside straight?
Article by Investment U
