Will History Repeat for Merck, GlaxoSmithKline?
Savvy investors may consider taking a long hard look at this beaten down behemoth as the worst could soon be over.
You know I think it's time to give this game a ride.
Just to hit the ball and touch 'em all - a moment in the sun;
(whack!) It's gone and you can tell that one goodbye!"
--John C. Fogerty
Don't look now folks, but very quietly the Yankees of New York are seven games back in the loss column to the Red Sox who are no doubt getting a serious case of 1978 deja vu. Will history repeat itself? Stay tuned folks. The last few days the Yanks have seemingly been rejuvenated by a 27 year old rookie named Shelley Duncan. The 6'5" son of Dave Duncan has dialed 9 three times already this year in his first 17 at bats. I am getting a serious case of deja vu as well as I hearken back to the first year of one Kevin Maas who in 1990 hit 21 home runs in a mere 254 at bats for the Bronx Bombers. Will history repeat itself? Hopefully for Shelley Duncan the answer is no as Kevin Maas quietly faded into the sunset after another very pedestrian four years in the bigs.
Somewhere there is a point - and here it comes! Take a look at what Merck (MRK) did yesterday after reporting a fantastic second quarter.
But it wasn't so long ago that a that a voluntary recall of Vioxx had investors reeling as the stock was brought out back to the woodshed. The stock traded down from $46 in September 2004, hitting $26 by November of that year. Street downgrades were everywhere with more than a few people saying that Merck was dead in the water. Now, granted the stock basically treaded water for about seven months, but that move lower clearly proved to be an incredible buying opportunity as Merck has made up that loss with room to spare.
Will history repeat itself? In the case of GlaxsoSmithKline (GSK) I think the answer is a resounding yes! When things went pear shaped after all the Avandia news this spring, GSK traded down to $51 from $58 without touching the sides. The not so very helpful Street downgrades followed and things have not gotten a lot better since. But although Avandia was a monster drug for GlaxsoSmithKline, the company is far from a one trick pony. One need only pull up the Product Development Pipeline off GSK's website to get a handle as to what is going on there. I fully understand that most of those drugs will never see the light of day, but you get my drift.
GSK is due to report earnings before the bell tomorrow and we will find out how bad things really are. Chances are the stock takes another one on the chin. But savvy investors may consider taking a long hard look at this beaten down behemoth as the worst could soon be over. You saw what the '78 Yanks did after being written off for dead and I think by this time next year owners of GSK may be whistling a happy tune. Oh yea, Kevin Maas, well to quote the great artist Meatloaf, "Two out of Three Ain't Bad."
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