As I’m looking to make a purchase while staying within budget, lots of companies that are priced below $40/share pique my interest. One of the those companies that seems to be a great buy right now is Abbott Laboratories. The Illinois based company operates in four different segments: Established Pharmaceutical Products, Nutritional Products, Diagnostic Products and Vascular Products. Their most popular set of products are heart stints and adult nutritional drinks. With a presence in over 150 countries and 125+ years of business experience, they’ve proved they can develop life improving and sustainable healthcare solutions.
Name: Abbott Laboratories (as of close 6/22/2016)
Current Price: $38.74
52 Week High Price:$51.74
52 Week Low Price: $36.00
Market Capitalization: $59.91B (Large Capital)
Price/Earnings (P/E Ratio): 23.85
Earnings/Share (EPS): $1.62
Dividend: $1.04/year (2.76% yield)
Primary Business: Medical Appliances & Equipment
The Good, The Bad and The Ugly
The world of healthcare is very competitive. From patent developments, medical research/development and an ever changing set of regulatory issues to face, healthcare is one of the most rigorous sectors. And to the outsider healthcare may seem a bit over saturated because so many companies seem to be doing the same thing, two different drugs serve the same purpose and some appliances with different labels and prices are interchangeable. But that’s why healthcare is an interesting place to invest. Healthcare is one of those industries where competition, as stressful as it maybe, can produce significant results for the people who actually need the drugs or appliances being produced by forcing companies to price there products competitively. Playing in a field with Johnson & Johnson, Merck & Co., Ely Lilly. & Co., Abbott Labs definitely has its work cut out for it on a daily basis. While Johnson & Johnson is about 4 or 5 times bigger than Abbott, and Merck is more well known in the pharmaceutical treatments space, Abbott marches to the beat of its own drum. The previously mentioned companies are trading between $55-$120/share, so as far as pricing is concerned, Abbott Labs is the only one in a decent price range for the small time investor on a budget like me.
But the price also makes you wonder, how did Abbott drop from graces with investors to be so far from a 52 week high? Earlier this year, investors went on a selling spree of Abbott Labs because when they announced a take over of Alere Inc. there soon after came an indication that Alere had been involved in bribery of international government agencies or corporations to gain favor in its overseas dealings. Abbott continued to press forward and audited the books of Alere because under the current purchase agreement that was made available on January 30th (before the bribery was discovered) a violation of the Foreign Corrupt Practices law isn’t necessarily a breech of the agreement. Now the question is can Abbott get out of the purchase agreement if this bribery is more deeply rooted than initially expected. Investors seem to have gotten worried that Abbott would lose tremendously because being associated with a company that practices bribery overseas can have a detrimental effect on international expansion. Since Abbott already has a big international presence, this really could hurt current business if no steps are taken to mitigate further risks of violating bribery laws once Alere is under the Abbott brand.
None the less this isn’t any type of recommendation, but I’m definitely looking to see what happens and how things pan out for Abbott as they try to close out this purchase of Alere. Folks who have had the stock for the past year have taken a sizeable hit by about losing $10/share. Parts of me wants to buy into Abbott now, but part of me hesitates because I prefer a company to be ethically sound and free of drama. Guess I’ll wait til Q2 earnings are announced in July to make a move.
Until next post folks…the Abbott-Alere saga continues