BUY PERRIGO, DR. REDDY'S LABORATORIES.
Perrigo Company (NDQ: PRGO)
The first company I found is called Perrigo. It is a leading manufacturer of generic over-the-counter and prescription pharmaceuticals. When you go to your local drugstore and see the retailer's private label of Aspirin or cough syrup selling for substantially less than the branded versions, there's a good chance that Perrigo was the manufacturer of that product.
The company also produces a broad range of over-the-counter consumer products including pregnancy tests, sleep aids, smoking cessation aids, anti-acids, etc. Recently they made large bets in the nutrition area by offering private-branded versions of popular multivitamins and other types of supplements. The company is also active in prescription pharmaceuticals through their Chemgis division, which provides active pharmaceutical ingredients for a variety of customers worldwide.
Perrigo is headquartered in Israel but has manufacturing facilities in Mexico, the U.S., and Germany along with operational divisions in China, India, and the U.K. As you can imagine in a depressed economy, consumers are increasingly choosing generic versions of popular over-the-counter products, which has allowed the company to grow while the sales of more expensive mainstream name-brand products are flat to down.
Revenue from their most recent quarter (to March 28) increased by 5% to $506 million as compared to $481 million in the prior year (figures in U.S. dollars). Sales of consumer healthcare products grew by 12%. Earnings came in at a record 50c per share.
For the first nine months of the 2009 fiscal year, net sales from continuing operations were $1.5 billion, an increase of 19% over fiscal 2008. Reported gross profit was $432.1 million, increase of 13% over last year, driven by the consumer healthcare segment.
Barron's recently ran a favorable article about the company, drawing attention to the fact that as long as consumers are under the gun they are likely to be frugal in their shopping habits. If they get used to using generic products it will be hard for branded manufacturers to persuade them to switch back when the economy recovers.
None of the products in the company's portfolio are particularly exotic and verge on being nondiscretionary for most consumers. So even if the market corrects again I think the stock can provide some stability in your portfolio. The fact it pays a small dividend (22c a year) contributes to the overall return.
The stock, which closed on Friday at $26.81, has recovered significantly from its March low of $18.54 but is still well below the 52-week high of $40, reached last September.
Action now: Buy.
Dr. Reddy's Laboratories (NYSE: RDY)
The second company I would recommend is Dr. Reddy's Laboratories. The company is based in India and has been a major player in the generic drug business for some time. It is not as large as TEVA or Barr Pharmaceuticals (NYSE: BRL) but is on the next tier down, ranking in the top 12 generic drug manufacturers in the U.S.
Dr. Reddy's products are positioned mainly against prescription pharmaceuticals. Although they produce some over-the-counter products, for the most part they cover a different segment of the market than Perrigo.
The company also conducts research on their own behalf in the areas of cancer, diabetes, metabolic disorders, and cardiovascular diseases. But their main business is creating generic products when the patents of mainstream drugs produced by the major pharmaceutical companies expire. Overall, their pipeline looks promising with several new drugs at an advanced stage of development.
The company has over 11,000 employees worldwide. Most of their facilities are in India but they also have manufacturing operations in the U.S. and Mexico. They have over 160 products marketed in the U.S.
The stock has been constrained by a long-standing patent infringement case brought against them by Astral Zeneca. However, Dr. Reddy's recently received a favorable summary judgment ruling and since then the stock has begun to recover from the low of $7.27 reached during the March meltdown. It closed on Friday at $15.30. The added benefit of this company is that it is located in India so you can play the Indian resurgence story as a by-product of this trade.
Dr. Reddy's reported fiscal year-end results on March 31. Revenue grew by 39% over 2008 with all divisions contributing. EBITDA was up by a very healthy 50%. The company pays a small dividend (9c per share annually) but the main opportunity here lies in its continued ability to grow. To my mind, it's the right kind of company, in the right part of the world, if you're looking for ways to profit from President Obama's proposed healthcare revolution.
Action now: Buy.
Perrigo Company (NDQ: PRGO)
The first company I found is called Perrigo. It is a leading manufacturer of generic over-the-counter and prescription pharmaceuticals. When you go to your local drugstore and see the retailer's private label of Aspirin or cough syrup selling for substantially less than the branded versions, there's a good chance that Perrigo was the manufacturer of that product.
The company also produces a broad range of over-the-counter consumer products including pregnancy tests, sleep aids, smoking cessation aids, anti-acids, etc. Recently they made large bets in the nutrition area by offering private-branded versions of popular multivitamins and other types of supplements. The company is also active in prescription pharmaceuticals through their Chemgis division, which provides active pharmaceutical ingredients for a variety of customers worldwide.
Perrigo is headquartered in Israel but has manufacturing facilities in Mexico, the U.S., and Germany along with operational divisions in China, India, and the U.K. As you can imagine in a depressed economy, consumers are increasingly choosing generic versions of popular over-the-counter products, which has allowed the company to grow while the sales of more expensive mainstream name-brand products are flat to down.
Revenue from their most recent quarter (to March 28) increased by 5% to $506 million as compared to $481 million in the prior year (figures in U.S. dollars). Sales of consumer healthcare products grew by 12%. Earnings came in at a record 50c per share.
For the first nine months of the 2009 fiscal year, net sales from continuing operations were $1.5 billion, an increase of 19% over fiscal 2008. Reported gross profit was $432.1 million, increase of 13% over last year, driven by the consumer healthcare segment.
Barron's recently ran a favorable article about the company, drawing attention to the fact that as long as consumers are under the gun they are likely to be frugal in their shopping habits. If they get used to using generic products it will be hard for branded manufacturers to persuade them to switch back when the economy recovers.
None of the products in the company's portfolio are particularly exotic and verge on being nondiscretionary for most consumers. So even if the market corrects again I think the stock can provide some stability in your portfolio. The fact it pays a small dividend (22c a year) contributes to the overall return.
The stock, which closed on Friday at $26.81, has recovered significantly from its March low of $18.54 but is still well below the 52-week high of $40, reached last September.
Action now: Buy.
Dr. Reddy's Laboratories (NYSE: RDY)
The second company I would recommend is Dr. Reddy's Laboratories. The company is based in India and has been a major player in the generic drug business for some time. It is not as large as TEVA or Barr Pharmaceuticals (NYSE: BRL) but is on the next tier down, ranking in the top 12 generic drug manufacturers in the U.S.
Dr. Reddy's products are positioned mainly against prescription pharmaceuticals. Although they produce some over-the-counter products, for the most part they cover a different segment of the market than Perrigo.
The company also conducts research on their own behalf in the areas of cancer, diabetes, metabolic disorders, and cardiovascular diseases. But their main business is creating generic products when the patents of mainstream drugs produced by the major pharmaceutical companies expire. Overall, their pipeline looks promising with several new drugs at an advanced stage of development.
The company has over 11,000 employees worldwide. Most of their facilities are in India but they also have manufacturing operations in the U.S. and Mexico. They have over 160 products marketed in the U.S.
The stock has been constrained by a long-standing patent infringement case brought against them by Astral Zeneca. However, Dr. Reddy's recently received a favorable summary judgment ruling and since then the stock has begun to recover from the low of $7.27 reached during the March meltdown. It closed on Friday at $15.30. The added benefit of this company is that it is located in India so you can play the Indian resurgence story as a by-product of this trade.
Dr. Reddy's reported fiscal year-end results on March 31. Revenue grew by 39% over 2008 with all divisions contributing. EBITDA was up by a very healthy 50%. The company pays a small dividend (9c per share annually) but the main opportunity here lies in its continued ability to grow. To my mind, it's the right kind of company, in the right part of the world, if you're looking for ways to profit from President Obama's proposed healthcare revolution.
Action now: Buy.
