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#1 SilentOne

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Posted 05 December 2006 - 07:50 AM

I have been watching PFE since the summer for an entry point. It was too overbought in Sept. to buy, but with this selloff, I think this is a good entry point and I bought an initial position at $24.60 yesterday. It pays very close to a 4% dividend (almost on par with a 10 year bond?). Looking at the falling wedge pattern, you could argue that the stock is going to slide to sub $20. It would then pay 5% dividend at that price, barring a dividend change. When was PFE last paying this kind of dividend?

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The stock sold off hard on bad news re: cholesterol drug in development was dropped due to failed clinical trials (and deaths). It wasn't a commercial product and the anti-cholesterol drug market is getting stagnant. So there is no immediate impact on financials, which are quite strong for PFE these days. Most observers bemoan lack of revenue growth potential at PFE.

Looking at a very long term chart, if I was going to buy something like a big pharma name for long term investment, it seems this would be a ideal entry point for PFE. I can't keep chasing precious metals stocks forever and I am slowly starting to think about deploying some LT money elsewhere over the next year. It is a defensive stock purchase and we'll see if it is timely.

Any thoughts out there??

cheers,

john
"By the Law of Periodical Repetition, everything which has happened once must happen again and again and again-and not capriciously, but at regular periods, and each thing in its own period, not another's, and each obeying its own law ..." - Mark Twain

#2 mss

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Posted 05 December 2006 - 09:35 AM

:)
Hi John,
My thoughts on all drug stocks is do not buy for dividends or long term growth. The reason is that there is great pressure on these companies to lower the cost of drugs to the public. When that happens, current profit that goes to dividends and RESEARCH, will be reduced.
Research for new drugs is their backbone for survival. IMO dividends will be cut and growth will be limited to actual new products placed on the market.

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Yields are another story. I am an adviser to several Trust's and have sold all drug stocks for the above reasons. For good yields there are a number of places to go that have yields of 4% or more with growth and a pay-out ratio of 1.0 or less. Below is a chart from Carl's Decision Point web site listing only a few.
My best is a thinly traded stock, but the only game in its class, GNI 9.8% with tradable growth. When it declines just add more to the pile.

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I have a vested interest in most of these.
Best to you, mss
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#3 Jnavin

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Posted 05 December 2006 - 09:46 AM

A letter writer in the current issue of Barron's makes a good case for DOW.

#4 SilentOne

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Posted 05 December 2006 - 11:28 AM

Hi mss,

Thanks for your comments. If I understand your comments correctly, you see no investment thesis for PFE or big pharma.

I can't comment on fundamentals, as I am from Missouri regarding the sector. I am aware of some of the issues facing the big pharma companies. I am simply looking at the pattern and the 7 year consolidation/correction PFE has undergone. It looks complete to me. The current decline appears to me to be simply an excuse to retest the lows of the last year.

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I'm going to shove a tight stop at yesterday's entry and see what PFE decides to do in Dec. That is the top of the triangle you drew. My take is that the stock should not have sold below that $24.50 level, but did so on yesterday's opening low.

It'll be interesting to see what the stock does if there is a stock buy back announcement or dividend increase in the future. It would not surprise me to see PFE mgmt pull a lever here to set a floor price under the stock. They are likely to acquire in the future, and they will need their stock as currency.

Thanks again for your perspective. Your comments will keep me on my toes.


cheers,

john
"By the Law of Periodical Repetition, everything which has happened once must happen again and again and again-and not capriciously, but at regular periods, and each thing in its own period, not another's, and each obeying its own law ..." - Mark Twain

#5 hiker

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Posted 05 December 2006 - 01:48 PM

John - none of the declines since late 2003 below the 55-week ema have resulted in a V-bottom type price action. Will this time be different? Thank you for your comments about HMY and the sector over the weekend.

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Edited by hiker, 05 December 2006 - 01:48 PM.


#6 mss

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Posted 05 December 2006 - 04:49 PM

Hi mss,

Thanks for your comments. If I understand your comments correctly, you see no investment thesis for PFE or big pharma.

cheers,

john

That is correct. However, it may, and others, offer great swing/position trades down the road.
I believe your question was buying it based on LT and dividends, and therefore their are much better ops.

The buy back thought in interesting, and will factor that into my analysis.
BTW, I lived and worked in St. Louie for 5 years, so understand you comments. B)

Best to you,
mss
WOMEN & CATS WILL DO AS THEY PLEASE, AND MEN & DOGS SHOULD GET USED TO THE IDEA.
A DOG ALWAYS OFFERS UNCONDITIONAL LOVE. CATS HAVE TO THINK ABOUT IT!!

#7 hiker

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Posted 05 December 2006 - 06:23 PM

John - this out tonight relates somewhat to the drug sector (defensive) - btw, in CNBC interview today Sam Stovall, author of below, stated his year-end forecast for SPX next year is 8% gain. Market Insight for December 5, 2006 RATE CUT BUMP By Sam Stovall, S&P Chief Investment Strategist When interest rates fall, optimism (and stock prices) usually rise. Nothing excites Wall Street more than the possibility of a new round of rate cuts by the Federal Reserve. Stock market history shows that when the Fed started cutting rates, investors typically received a greater than two-for-one stock price return in other words, more than a year's worth of stock market advances (based on the average annual gain for the S&P 500, since 1945, of 9%) in six months. Take a look at the accompanying table, which shows price performance for the major stock and bond indices six months after the Federal Reserve started lowering interest rates. (Discount rates were analyzed from 1945 through 1982 and the Fed funds rate thereafter.) Standard & Poor's expects the Fed to make its first rate cut in the summer of 2007. The Fed has launched 10 rate-cutting campaigns since World War II. In the six months after the first cut, the S&P 500 advanced an average of 11%, two percentage points better than the average price increase in all years since 1945. A bit surprisingly, the market did not rise in each case, as stock prices fell four out of 10 times. Not shown in the table, however, is that 12 months after the first rate cut, the S&P 500 gained an average of 18.6% and posted an increase in nine of 10 observations (lower rates were not enough to stop the market meltdown in 2001). Since 1980, the starting date for most major indices, we see that during the first six months of rate reductions, growth generally beat value, small-caps outperformed large-caps, and the cyclical groups beat them all. Finally, we note that while bonds advanced fairly consistently, they usually lagged behind equities, even as rates fell. Digging a little deeper to the sector level, if 2007 is indeed a year when investors look beyond the mid-cycle pause in the economy to the recovery that is widely expected for 2008, they may again embrace cyclical sectors at the expense of the defensive ones. Looking at data that shows average price performance (and frequencies of outperformance) for the underlying industries from 1945 through 1982, and S&P sector level data thereafter, we found that the strongest price performance came from the cyclical consumer discretionary, industrials, and information technology sectors. The financials, telecom services, and utilities sectors posted the smallest average advances. The highest frequency of outperformance was found in the consumer staples, industrials, and information technology sectors. Remember, of course, that past performance is no guarantee of future results.

Edited by hiker, 05 December 2006 - 06:25 PM.


#8 PorkLoin

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Posted 06 December 2006 - 08:19 AM

What a fantastic thread. I love it just for the pleasure of reading it all.

Edited by PorkLoin, 06 December 2006 - 08:19 AM.


#9 SilentOne

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Posted 07 December 2006 - 05:46 AM

Hi doug, Do you have an ewave take on PFE? I exited the position yesterday and will continue to watch. It still looks to be setting up a probable buy in the coming days. cheers, john
"By the Law of Periodical Repetition, everything which has happened once must happen again and again and again-and not capriciously, but at regular periods, and each thing in its own period, not another's, and each obeying its own law ..." - Mark Twain

#10 PorkLoin

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Posted 10 December 2006 - 01:50 PM

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Hi John,

Pfizer had the big move up into the double top in 1999 and 2000. I think a "Head and Shoulders" bottom for 2005 has already been compromised, and that a ton of buying power would be exhausted just filling that BIG recent gap.

I sure don't have a crystal ball, but when the money flow (CMF) has gotten up there, like it is now, it's meant a better time to sell than a time to buy since 2000.

To me, looks like a nice ABC up from the December low. 1-2, 1-2 would be majorly bullish, but that gap has me doubting such is in force. I think the daily chart says that 25.50 - 26.00 is stout resistance. Get through that and we'll see.

Longer-term, I'd like to buy on a test of 22 that didn't close below it significantly.


Best,

Doug