Tuesday, February 25, 2014

" Now that Actavis has bought out Forest Laboratories, what girls are left at the dance for the other pharma partners to pick up? My pick is Salix Pharmaceuticals (SLXP), $6.63 billion market cap, rather than Mylan Labs."

Dow Jones Industrial Average 16,103.30 (Down) Week ending 02-21-2014

 Julia Roberts - waiting for a dance partner
I am familiar with Salix Pharmaceuticals (Symbol SLXP, $105.37) for two reasons. I had started watching Salix when the stock was trading at 14 dollars per share and it went up to 21 and so I thought it was too expensive, so then I forgot about it and lost track of it. Secondly, I owned the stock of Santarus, which I had talked about on this blog earlier in an article last year and a couple of months ago Salix Pharmaceuticals came in and bought them out. So this time I am paying attention to SLXP.  

Now let's go over the numbers that make it so attractive. First, the Current ratio on the stock is 4.3 to 1. The current market capitalization of the company is $6.63 Billion so it is a Mid-Cap stock. (I started this blog on Sunday last, so things are in motion). The company has annual revenues of $874.4 Million dollars. 2014 Revenues are projected at $1.59 Billion dollars.
This Raleigh, NC company has a One year stock price appreciation of 113.43% for the trailing 12 months. The company has 1 year earnings growth of 73.1%. 

On my key benchmarks, the company has a PEG Ratio of 1.19 and a Return on Equity of 17.90%. A double pass on my checkoff list. The IBD rating on the stock for earnings is 93.

2013 earnings were $3.23 per share and for 2014 is projecting out at $6.04 per share. This is a forward PE of 16.94. The company operates at gross margins of 81.99 %. 

Analyst Rankings on the stock are 7 Buy - 1 Outperform and 4 - Hold ratings. Hedge fund managers Joel Greenblatt and George Soros have been active trading the stock over the last year.

I would look for a down day in the market to find an entry point on this one. Again, always buy in small and accumulate a position even if you only buy 10 shares at a time.

I think that this holding will work out well for you for growth  as part of your Healthcare holdings segment of your diversified portfolio.

Have a good week and the sooner you invest, the better your odds are of accumulating wealth. 



  1. Haha. I don't recommend Mylan, and they go up 4 1/2 points yesterday on a good earnings report. Salix was up 1 1/2 and is up 5 point in after hours. I guess you could have bought both. Freewilly

    1. It's funny: what you said at the end about how "the sooner you invest, the sooner you will accumulate wealth" made me think about the lottery. I'm always troubled by the "bullying" I receive when I fail to put in $5 after $5 bill to play the powerball at work. In reality, people could invest even small amounts of money in the stock market and see noticeable gains in their financial wealth. It may not be $60 million dollars, but I would rather earn money, (realistically,) than throw away my cash for the powerball, where my chances of winning are less than my chances of being struck by lightning ten times in the same place. I think it's strange that people are intimidated by the idea of "investing," as if that is an activity reserved for a certain class of people. Any thoughts on this notion? What could make people as comfortable with "playing the odds" of the stock market as they are with handing over cash to the lottery?

    2. Blue Roses you are correct. The whole purpose of this blog is so that people will not be intimidated by investing. Anybody can be successful at it and saving money in small amounts and buying in with small investments is a great way to go. You play the odds, just like in poker, on betting heavier on the best opportunities as they present themselves. You get to invest in all the best stocks. There is no mystery to it! Freewilly (a.k.a. Dad)

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