Actavis to Buy Allergan; Valeant Waves the White Flag

Goodfellow LLC is a growth stock website.  Our subscribers are stock portfolio investors and investment advisors who want better stock ideas, to improve their stock portfolio performance.  All of our stock selections are screened via strict fundamental & technical criteria, designed to maximize growth while minimizing risk.

It only costs $10 to join us for a one-week trial, 

to see whether Goodfellow LLC can help increase your capital gains!

* * * * *

(ACT, $248.78, up $5.01 midday)

(AGN, $210.02, up $11.37 midday)

(VRX, $134.46, up $0.25 midday)

 

Actavis PLC (ACT) has agreed to purchase Allergan Inc. (AGN), maker of Botox, in a deal valued at $66 billion.  Valeant Pharmaceuticals International (VRX) has stated that their hostile pursuit of Allergan is over.

Allergan shareholders will receive approximately $219 per share in cash and stock.

 

Actavis PLC:

Watson Pharmaceuticals acquired Actavis in October 2012, and changed its name to Actavis PLC.  Then in October 2013, Actavis acquired drugmaker Warner Chilcott.  Finally, in July 2014, ACT acquired Forest Laboratories, which had recently acquired Furiex Pharmaceuticals and Aptalis Holdings.

I recommended ACT shares three times in September and October.   The stock has since risen 12.0% since my last buy recommendation on October 16, 2014, when the share price was $222.07.  While I still love the earnings growth and price/earnings ratio on ACT shares, I’m now changing my rating to hold, due to the escalating debt levels at the company.  (Goodfellow LLC is a growth stock website, concentrating on value in order to lower investment risk.  High debt levels are not a component of a good value stock.)

 

Allergan Inc.:

Allergan shares were featured in the Goodfellow LLC Growth Stock Portfolio for 2013, during which time the stock price rose 21.1%.

My recommendation is that AGN shareholders plan to sell now, or soon, as the stock approaches $219, because:

• there is very little upside left to the share price.

• the ACT shares that they will receive contain risk associated with high long-term debt levels.

• Actavis’ share price growth could easily be interrupted during and after the buyout process.  (In a typical buyout scenario, the company doing the purchasing — Actavis PLC — has a stagnant share price for many months as it absorbs the acquisition, and Wall Street watches the finances of the new company shake out.)

• their cost basis calculation, when it’s time to file income taxes, will be more complicated than most investors and tax preparers are easily capable of dealing with (and remember, you are paying accountants for the time they spend on this).

• investors need to always consider the time value of money.  If investors hold shares for nine months, for example, waiting for a deal to go through, that’s nine months of time that their capital could have been invested in an undervalued growth stock with a bullish chart, ideally continuing to grow.

All eight 2013 and 2012 Goodfellow LLC stock portfolios

dramatically outperformed both the S&P 500 and the Dow!

(all Goodfellow LLC articles featuring buy-recommended stocks

are reserved for subscribers)

 

Valeant Pharmaceuticals:

I urged investors to buy Valeant Pharmaceuticals from January 2013 through January 2014.  The stock then rose as much as 127% through March 3, 2014.  The share price was $143.36 when I removed my buy rating on the stock.  At that point, the company reported increased debt levels, which had risen on the heels of its 2013 Bausch & Lomb acquisition.  I told investors to use stop-loss orders to protect their profits.  The stock proceeded to fall as low as $106 in August.

I will continue to avoid VRX shares until its balance sheet figures meet the investment criteria at Goodfellow LLC.

 

* * * * *

Send questions and comments to research@GoodfellowLLC.com.

Happy investing!

Crista Huff

President

Goodfellow LLC

* * * * *

Investment Disclaimer

Release of Liability: Through use of this website viewing or using you agree to hold www.GoodfellowLLC.com and its employees harmless and to completely release www.GoodfellowLLC.com and its employees from any and all liability due to any and all loss (monetary or otherwise), damage (monetary or otherwise), or injury (monetary or otherwise) that you may incur.

Goodfellow LLC and its employees are not paid by third parties to promote nor disparage any investment. Recommendations are based on hypothetical situations of what we would do, not advice on what you should do.

Neither Goodfellow LLC nor its employees are licensed investment advisors, tax advisors, nor attorneys. Consult with a licensed investment advisor and a tax advisor to determine the suitability of any investment.

The information provided herein is obtained from sources believed to be reliable but is not guaranteed as to accuracy or completeness. When information is provided herein from third parties — such as financial news outlets, financial websites, investment firms, or any other source of financial information – the reliability or completeness of such financial information cannot be guaranteed.

The information contained on this website is provided for informational purposes only and contains no investment advice or recommendations to buy or sell any specific securities. This is not an offer or solicitation for any particular trading strategy, or confirmation of any transaction. Statements made on the website are based on the authors’ opinions and based on information available at the time this page was published. The creators are not liable for any errors, omissions or misstatements. Any performance data quoted represents past performance and past performance is not a guarantee of future results. Investments always have a degree of risk, including the potential risk of the loss of the investor’s entire principal. There is no guarantee against any loss.