Serwer: Two losers and a winner
NEW YORK (CNNMoney.com) - Altria, Merck and GM. Three companies in the news. Three companies that have been in, or are in, the deep stew. Do any of 'em make sense to buy right now? Hey you're supposed to pick stocks when they're cheap right? Well here's my take.
MERCK: I say don't buy it yet. There are several big problems here. One: Vioxx litigation, and Two: a lack of high quality new drugs in the pipeline. The latter happens from time to time, the former is an unquantifiable issue, and that's the problem. You just don't know how bad things are yet. Just the other day another shoe dropped: the New England Journal of Medicine reported more problems with Vioxx testing. Also, the federal Vioxx case in Texas ended in a mistrial and there are thousand more to go. Only positive: The stock (Research) hasn't been this cheap since dinosaurs roamed the earth. Trailing P/E of 14. Still I say dead money for a while, though at some point this will be a buy.
GM: Nope here too. Problems at GM are just too huge. At $22, GM's stock is exactly where it was in 1962! That's 43 years! As in when JFK was president! Yes I know the company has paid dividends, but this a loser of mammoth proportions. And there is no reason to believe that things will be any different going forward. Ooops, actually I'm wrong. It could be worse. And don't think GM (Research) can't go bankrupt. It can. Just ask Standard & Poor's. The company keeps losing billions and there won't be a choice! The only way out of this trap is if GM breaks the United Auto Workers. And I don't think that will happen. The UAW will go down with GM. Avoid I say.
Altria: This puppy is looking good to me. Yes I know the stock is up 32 percent this year, and it has more than doubled since 2003. The Illinois Supreme Court throwing out the $10 billion verdict in the Price case is a huge boost. ('Lite' cigarette cases appear pretty bogus to me.) But I would argue that Altria is still relatively cheap, P/E below 16 on a trailing basis, (can you BELIEVE Merck is cheaper than Altria!) Plus, Wall Street moves slowly. There is still a huge bias against the Big Mo (Research) (as it's called on the Street.) And the Kraft spinoff will only add value---the company will also likely split off its still-growing international tobacco business. Even at these "lofty" levels, Altria still yields 4.3%. So as Commander Cody used to say, "smoke, smoke, smoke that cigarette!"
MERCK: I say don't buy it yet. There are several big problems here. One: Vioxx litigation, and Two: a lack of high quality new drugs in the pipeline. The latter happens from time to time, the former is an unquantifiable issue, and that's the problem. You just don't know how bad things are yet. Just the other day another shoe dropped: the New England Journal of Medicine reported more problems with Vioxx testing. Also, the federal Vioxx case in Texas ended in a mistrial and there are thousand more to go. Only positive: The stock (Research) hasn't been this cheap since dinosaurs roamed the earth. Trailing P/E of 14. Still I say dead money for a while, though at some point this will be a buy.
GM: Nope here too. Problems at GM are just too huge. At $22, GM's stock is exactly where it was in 1962! That's 43 years! As in when JFK was president! Yes I know the company has paid dividends, but this a loser of mammoth proportions. And there is no reason to believe that things will be any different going forward. Ooops, actually I'm wrong. It could be worse. And don't think GM (Research) can't go bankrupt. It can. Just ask Standard & Poor's. The company keeps losing billions and there won't be a choice! The only way out of this trap is if GM breaks the United Auto Workers. And I don't think that will happen. The UAW will go down with GM. Avoid I say.
Altria: This puppy is looking good to me. Yes I know the stock is up 32 percent this year, and it has more than doubled since 2003. The Illinois Supreme Court throwing out the $10 billion verdict in the Price case is a huge boost. ('Lite' cigarette cases appear pretty bogus to me.) But I would argue that Altria is still relatively cheap, P/E below 16 on a trailing basis, (can you BELIEVE Merck is cheaper than Altria!) Plus, Wall Street moves slowly. There is still a huge bias against the Big Mo (Research) (as it's called on the Street.) And the Kraft spinoff will only add value---the company will also likely split off its still-growing international tobacco business. Even at these "lofty" levels, Altria still yields 4.3%. So as Commander Cody used to say, "smoke, smoke, smoke that cigarette!"
posted by Chris Placitella at 8:09 AM
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