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January 26, 2007
A look at Amgen, Fri., Jan. 26, 2007, 12:02 PM
Earlier today you may have noticed that I listed AMGN among the "In Focus" charts. I did that because of the bad corporate news coming out, and the market chatter I expected to follow.
AMGN is down -5.2 pct this morning on missed expectations. Long-term, I like Amgen, but I like Biomet (BMET) better in that space. Biomet is part of the Cara 100 because of (i) the peer-beating return on equity (23.8 vs 15.4 for AMGN), (ii) lower PE multiple (25.1 vs 29.2 for AMGN), and much smaller capitalization ($10.3 billion vs $83 bil for AMGN). The latter is a case of the law of big numbers, which favors the smaller company.
BMET is down just -0.1 pct today.
Biomet Inc [GICS 35, Cara 100](BMET: Yahoo Finance file)
(BMET: StockChart chart)
(BMET: Investertech chart)
(BMET: ADVFN Financial Data)
(BMET: ADVFN Financial Data)
The past three months has seen BMET (blue) pull away very substantially from AMGN.
Amgen is a fine company with a Gross Margin of 85.4 pct and an Operating Margin of 37.2 pct (vs 71.2 pct and 29.6 pct for BMET). Quarterly earnings growth for AMGN has been 14.5 pct vs just 5.2 pct for BMET.
But Amgen has been running into problems and the trading since the beginning of November illustrates that fact.
In this space, Cara 100 Bristol-Myers Squibb (BMY) posted a 4Q loss today, with competition from generic drug makers, but I continue to like the company. The shares have taken a hit today (-0.8 pct).
Bristol Myers Squibb Co [GICS 35, Cara 100](BMY: Yahoo Finance file)
(BMY: StockChart chart)
(BMY: Investertech chart)
(BMY: ADVFN Financial Data)
(BMY: ADVFN Financial Data)
Traders should try hard to avoid making knee-jerk reactions to the market spin on quarterly earnings reports. At the end of the day, you need to be focused on Accumulation and Distribution Zones. The rest of the time, you need to be thinking about just one thing for each stock in your watch list: is this quality company running off the rails? Could anything happen to break the company or the stock? If not, you stick to buying pull-backs and selling a little during the over-bought periods.
The plain vanilla truth is that most of you trade just once or twice a month. So it is important to read the daily news and commentary with that in mind.
Posted by Posted by Bill Cara on January 26, 2007 12:02:35 PM | Category: 35 Health Care
Discourse
BMET won't be public for too long - it is being acquired by a PE consortium, unfortunately. The deal is expected to close sometime this year.
Posted by: AA ![[TypeKey Profile Page]](http://www.billcara.com/nav-commenters.gif)
at
January 26, 2007 12:50 PM [link]
"Bill" wrote to me: "I like BMET, too, BUT since BMET is involved in a private equity $44 cash buyout deal (some say a 7/31 close, others say 10/31), isn't an AMGN vs. BMET trading comparison based on one day's trade inappropriate?? Come on, Bill, you're usually MUCH more right on!"
Yes, "Bill" you are right. For six to eight weeks I have been pushing too hard to finish a manuscript, and also ran into a couple health issues. My mind feels like mush, and I have pretty much shut down. So maybe I should not have written anything about Biomet.
Maybe the gain of +5.0 pct in the next 6 to 9 months beats the market, or maybe another bid comes in, or whatever. But the truth is I should not have written about BMET on Friday. I spent most of Friday in bed. Maybe I should have spent all of it there, as I have for much of the weekend. I'll be back to normal soon.
Posted by: Bill Cara at
January 28, 2007 2:42 PM [link]
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AMGN - if it is taken down to $65 (lower end of recent range) it will offer a good entry especially for holding longer-term.
Posted by: lauriston![[TypeKey Profile Page]](http://www.billcara.com/nav-commenters.gif)
at
January 26, 2007 12:31 PM [link]