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Which Abbott Shares Should You Keep?

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For the time being, one of the two post-split companies has a far better likelihood of success than the other.

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Rising income levels are driving sales of infant and adult nutritionals in emerging markets, and Abbott has been increasing its penetration, especially in China, Southeast Asia, and Latin America through moves like the 2009 acquisition of the nutritional business of India's Wickhardt. Margins in this business are likely to increase as the company is able to spread the costs of growth over an increasing sales base.

Abbott's generic drug business is another unit taking advantage of faster growth in developing than developed economies. In 2010, Abbott acquired Solvay Pharmaceuticals, which brought the company a portfolio of branded generic drugs and expanded Abbott's presence in Eastern Europe, Russia, India, and Brazil.

This isn't to say that the post-split Abbott Laboratories doesn't have problems-especially in its medical device business. For example, Abbott's drug-eluting stents are a market leader, but sales have been under pressure and prices have been falling.

I think the problems in the division are certainly fixable through an acquisition or two, but the challenge will be buying the right technologies at the right price in a market where customers are under pressure to cut costs.

I still think that adding up the pluses and minuses comes out very strongly in favor of the post-split Abbott Laboratories, and I'll be adding to that position by selling my shares of AbbVie today.

Editor's Note: This article was written by Jim Jubak of MoneyShow.

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No positions in stocks mentioned.
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