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business newsTicker Shock: Five Reasons Why Merck Is Just What the Doctor Ordered
Monday's top stories and stocks with potential to move.
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Asian stocks were a bit of a mixed bag. The Hang Seng was off 2%, and the Nikkei was up 1%. Meanwhile, European stocks were in the red earlier this morning. And here in the US, we're currently trading lower.
Here's what I’m focused on this morning:
Merck (MRK):
These guys just can’t catch a cotton-pickin' break, can they? The stock continues to suck some nice wind, as you can see by looking at this chart.
On Friday (as some of you may have already seen), it was reported that one of its pipeline products -- the heart drug, Rolofylline -- didn’t meet its trial goals.
I think some people, having pondered the new over the weekend, may head for the hills. But that would be a big-time mistake. In fact, my conviction in this company is as strong as ever. Some thoughts:
1. I don’t think in the grand scheme of things that this news will have that much of an impact. A good read is this CNBC piece.
2. I’m still thinking that a hitch up with Schering (SGP) will be a big positive for the common holder: Lots of cost savings will likely be realized, and the deal should raise its profile/standing in a big way with the analysts and the general public.
3. It trades at just 8.1 times the current-year estimate, for Pete’s sake. 4. Overall expectations are slightly low for these guys. That means that any good news could have a big and positive impact.
5. There seems to be some positive news out there about its diabetes product, Januvia. I’m hoping lots of eyes will see it so the share price could possibly get a goose.
Lion’s Gate Entertainment (LGF):
At first blush, the film studio doesn’t look like a great opportunity, but perhaps it could be.The first things I see when I do a once-over:
It trades at more than 20 times the current-year estimate of $0.27, and the shares seem to be struggling a tad, trading only a wee bit north of the $5 level. (Remember that some institutions often don’t like to dabble in stocks that trade under the $5 benchmark.)
But Carl Icahn gives me hope. Apparently he’s been scooping up shares, and according to reports, has a more than 15% stake.
Of course, just because Carl and crew are involved doesn’t mean the stock is on the launch pad and ready for takeoff.
But I do have a sense that: 1. The board and the current management team could be burning the midnight oil as a result of his dabbling, trying to find good ways to enhance value for the common stockholder as a way of proving their worth to the current base.
2. Other institutions may see Icahn’s penchant for the shares and hop aboard on the hopes he’s sniffed out something good. If I’m right, that could be a short-term catalyst for the stock.
3. Icahn’s involvement may give existing shareholders hope, and by extension, a reason not to bail come tax-loss selling season.
I plan on keeping an eye peeled. Stay tuned.
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