This is the updates from Canadian based Internet Wealth Builder on Lundin Mining, Johnson & Johnson and Gilead Sciences.
Lundin Mining (TSX: LUN, OTC: LUNMF)
Originally recommended by Yola Edwards on May 17/07 (IWB #2719) at C$14.18. Closed Friday at C$8.33, US$8.61.
The drama continues. This is starting to feel like a soap opera. The much-heralded merger between Lundin and Inmet Mining, which was supposed to create a world-class copper producer, is dead, a victim of the unpredictability of the Panamanian government which is trying to micro-manage Inmet's rich Cobre Panama project.
Lundin subsequently announced a limited-time shareholder rights plan designed to fend off the hostile takeover bid from Equinox Minerals and give the company some breathing room to find an alternative buyer.
Commenting on the next stage, CEO Phil Wright said: "Our exploration of alternatives starts immediately and we will be actively and aggressively looking for the best value transaction. The rights plan ensures that we can do this in a considered and structured way and get the best result for our shareholders."
The market clearly expects something positive to come out of all this. Lundin's share price has moved past the $8.10 offered by Equinox and closed on Friday at $8.33. Sit tight and stay tuned.
Action now: Hold.
Johnson & Johnson (NYSE: JNJ)
Originally recommended on Feb. 23/09 (IWB #2908) at $54.65. Closed Friday at $59.49. All figures in U.S. currency.
This pharmaceutical giant continues to frustrate investors. I recommended it when stock markets were approaching their lowest point of the 2008-09 crash, expecting to profit from a strong rebound. But while many other blue chips are up 50% and more since then, JNJ has gained less than 10%. True, we are receiving a decent dividend ($2.16 a year) but I expected a lot more from this one.
The company has been hit by a rash of recalls (e.g. batches of sutures, Tylenol eight-hour caplets), lawsuits (an award of almost $600 million against JNJ for patent infringement), actions against some of its manufacturing facilities by the Food and Drug Administration, and loss of market share in the lucrative stent business.
Nor were investors cheered by the 2010 year-end results which saw worldwide sales decline by 0.5% year-over-year. Net earnings per share increased 2.8% to $4.76 from $4.63 in 2009 but that was unimpressive compared to EPS gains by other blue-chip companies. However, it is clear from those numbers that the dividend is safe.
The stock yields 3.6% at the current price (3.95% if you bought on my original recommendation) so it is worth holding on to if U.S. cash flow is important. But I would not buy more at this stage. The company seems to be accident-prone.
Action now: Hold.
Gilead Sciences (NDQ: GILD)
Originally recommended on May 4/09 (IWB #2917) at $44.81. Closed Friday at $42.66. All figures in U.S. currency.
Gilead is faring somewhat better than JNJ. Although the share price remains slightly below the original recommended level, it is up more than 22% since my last update in June 2010.
The company reported year-end results recently and they were encouraging. Revenue for 2010 came in at $7.95 billion, up 13.4% from the previous year. Net earnings were $2.9 billion ($3.32 a share, fully diluted), up from $2.64 billion ($2.82 a share). In absolute terms, earnings increased by 10.1% but they were ahead 17.7% on a per share basis thanks to the company's aggressive buyback program which has reduced the number of shares outstanding by 7% since 2008.
Like all pharmaceutical companies, Gilead has been negatively affected by the new health care legislation in the U.S. The company estimates that the impact of health care reform on sales will be approximately 5%-6% of U.S. net product sales this year. This uncertainty has put a lid on the share price and we should not expect to see any significant gains in the near term.
Since the stock does not pay a dividend and the prospects for capital gains in the near to mid-term is limited, I suggest we exit Gilead now and redeploy the money where it may potentially be more productive.
Action now: Sell. - G.P.
Lundin Mining (TSX: LUN, OTC: LUNMF)
Originally recommended by Yola Edwards on May 17/07 (IWB #2719) at C$14.18. Closed Friday at C$8.33, US$8.61.
The drama continues. This is starting to feel like a soap opera. The much-heralded merger between Lundin and Inmet Mining, which was supposed to create a world-class copper producer, is dead, a victim of the unpredictability of the Panamanian government which is trying to micro-manage Inmet's rich Cobre Panama project.
Lundin subsequently announced a limited-time shareholder rights plan designed to fend off the hostile takeover bid from Equinox Minerals and give the company some breathing room to find an alternative buyer.
Commenting on the next stage, CEO Phil Wright said: "Our exploration of alternatives starts immediately and we will be actively and aggressively looking for the best value transaction. The rights plan ensures that we can do this in a considered and structured way and get the best result for our shareholders."
The market clearly expects something positive to come out of all this. Lundin's share price has moved past the $8.10 offered by Equinox and closed on Friday at $8.33. Sit tight and stay tuned.
Action now: Hold.
Johnson & Johnson (NYSE: JNJ)
Originally recommended on Feb. 23/09 (IWB #2908) at $54.65. Closed Friday at $59.49. All figures in U.S. currency.
This pharmaceutical giant continues to frustrate investors. I recommended it when stock markets were approaching their lowest point of the 2008-09 crash, expecting to profit from a strong rebound. But while many other blue chips are up 50% and more since then, JNJ has gained less than 10%. True, we are receiving a decent dividend ($2.16 a year) but I expected a lot more from this one.
The company has been hit by a rash of recalls (e.g. batches of sutures, Tylenol eight-hour caplets), lawsuits (an award of almost $600 million against JNJ for patent infringement), actions against some of its manufacturing facilities by the Food and Drug Administration, and loss of market share in the lucrative stent business.
Nor were investors cheered by the 2010 year-end results which saw worldwide sales decline by 0.5% year-over-year. Net earnings per share increased 2.8% to $4.76 from $4.63 in 2009 but that was unimpressive compared to EPS gains by other blue-chip companies. However, it is clear from those numbers that the dividend is safe.
The stock yields 3.6% at the current price (3.95% if you bought on my original recommendation) so it is worth holding on to if U.S. cash flow is important. But I would not buy more at this stage. The company seems to be accident-prone.
Action now: Hold.
Gilead Sciences (NDQ: GILD)
Originally recommended on May 4/09 (IWB #2917) at $44.81. Closed Friday at $42.66. All figures in U.S. currency.
Gilead is faring somewhat better than JNJ. Although the share price remains slightly below the original recommended level, it is up more than 22% since my last update in June 2010.
The company reported year-end results recently and they were encouraging. Revenue for 2010 came in at $7.95 billion, up 13.4% from the previous year. Net earnings were $2.9 billion ($3.32 a share, fully diluted), up from $2.64 billion ($2.82 a share). In absolute terms, earnings increased by 10.1% but they were ahead 17.7% on a per share basis thanks to the company's aggressive buyback program which has reduced the number of shares outstanding by 7% since 2008.
Like all pharmaceutical companies, Gilead has been negatively affected by the new health care legislation in the U.S. The company estimates that the impact of health care reform on sales will be approximately 5%-6% of U.S. net product sales this year. This uncertainty has put a lid on the share price and we should not expect to see any significant gains in the near term.
Since the stock does not pay a dividend and the prospects for capital gains in the near to mid-term is limited, I suggest we exit Gilead now and redeploy the money where it may potentially be more productive.
Action now: Sell. - G.P.
