Top Seven Global HealthCare Stocks

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Investors are attracted to HealthCare stocks during recessions as these healthcare companies perform better when compared to other companies in other industries. For example in 2008, the S&P 500 Index was down 38.49% but the healthcare components in the index were off only 24.48%. Consumer staples was the best performing group with a negative return of 17.66%.

Among the stocks in this sector, it is advantageous to invest in large firms that have a diversified portfolio of products and a presence in many countries. In order to identify such companies I selected the Dow Jones Global Titans 50 Index. This index components are selected based on free-float market capitalization, sales/revenue and net profit. It is composed of the most established blue-chip companies from around the world. Out of the seven healthcare components in this index, four are US-based. The following is a brief overview of these seven companies:

1.Abbott Laboratories (ABT) is a global health company with 68,000 employees and has been in business for over 120 years.In 2007, total sales was $25.9 B. Abbott operates in three divisions: Pharmaceuticals,Medical Products and Nutritional Products. Some of Abbott’s brands include Ensure, Pedialyte, Similac, etc. ABT pays a dividend of 2.7% and the P/E is 18.33. Last year, “the United States Food and Drug Administration (FDA) approved the Company’s SIMCOR (Niaspan/simvastatin), a medicine for cholesterol management.”

2.The UK-based GlaxoSmithKline PLC (GSK) sells its products in over 140 countries. In the Pharmaceutical segment, GSK’s brands include Avandia, Paxil, Zantac, etc. and in Consumer Healthcare some of its brands are Aquafresh, Eno, Nicorette. In 2007, total revenues exceeded $30B. The current yield is 5.10%.

3. Johnson& Johnson (JNJ) markets a wide range of products such a Acuvue, Neuragena, Listerine, Band-Aid, Tylenol, etc. Total Revenue in 2007 was $64.5B. Annual EPS growth is about 11%. JNJ is a solid long-term classic growth stock with an incredible ability to weather any kind of market.

4. New-Jersey based Merck & Co Inc(MRK) has manufacturing operations in 25 countries. Total sales in 2007 was $24.2 B. Some of Merck’s popular products are Singulair, Vytorin, etc. MRK’s current yield is 5.0%. In the past 12 months, while peer companies have increased earnings Merck saw earnings decline.

5. Pfizer Inc(PFE) is “the world’s largest research-based biomedical and pharmaceutical company” with headquarters in New York. Revenues in 2007 was $48.4 B. Some of Pfizer’s key products include Aricept, Detrol, Viagra,Lipitor, etc. The annual EPS growth in the last 5 years has been negative but currently the yield is 7.23%.

6.Switzerland-based Novartis AG (NVS) operates in three divisions: Pharmaceuticals, Vaccines and Diagnostics and Consumer Health. Novartis had $42.B in revenues in 2007.Earnings have growth at 12.5% annually and the stock pays a dividend of 3.09%. Novartis portfolio of products include Lamisil, Gleevac, Exedrin, Gas-X, Maalox, etc.

7. Roche Holding Ltd is traded in the OTC market with ticker RHHBY. Roche also based in Switzerland.In 2007, sales totalled $41.3 B. On Dec 19th, Roche announced the following changes to its ADR program:

  • Changed Depository Bank to JP Morgan from Bank of New York Mellon.
  • Upgraded to the OTCQX trading platform.
  • Changed Ratio to 1 ADR = 1/4 Non-voting share. Earlier 1 ADR represented 1/2 of non-voting share.

Unluck of the Irish Banks

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A few years ago The Republic of Ireland had one of the fastest growing economies in Europe. Then growth slowed and in the past two years or so the Irish economy stagnated and growth came to a standstill.

Irish stocks have been hit pretty hard as well in 2008 – especially the banks. As of market close today, the Bank of Ireland (IRE) is down an incredible 92.11%, Allied Irish Banks (AIB) is down 89.79% and Anglo Irish Bank (AGIBY) is trading at a $0.20 (yes thats right its just 20 cents) a share from much higher levels in the beginning of the year.

On Dec 22, the Government of Ireland announced capital infusions into the three banks amounting to 5.5 Billon Euros. As per the plan, the government will invest:

2.0 Bil. Euros each in IRE and AIB

and

take a 75% stake in Anglo Irish Bank – effectively nationalizing it.

The above data clearly shows that the supposedly safe Ireland banks were not immune to the global slowdown. A while ago Irish banks and banks from other European countries boasted that they had no or little exposure to the sub-prime crisis in the USA. That did prevent them from falling since their domestic markets cratered. Residential, Commercial Property loans went bad just like in the US.

The closed-end fund “The New Ireland Fund” (IRL) is also down over 75% this year.

So investors interesting in gaining some exposure may want to wait for a while before investing in Irish stocks. In addition to the world economy getting back on its feet, one has to monitor the domestic economy especially he housing sector.

Two DJ STOXX Global Dividend 100 Index Components

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One of the many indices published by STOXX is the “Dow Jones STOXX Global Dividend 100 Index”. This index “offers investors the ideal tool to track high-dividend-yielding companies in the Dow Jones STOXX Global 1800 Index, a broad yet liquid benchmark index that covers the Americas, Europe and Asia/Pacific”.

The 100 stocks in this index is comprised of 40 stocks from the Americas and 30 stocks each for Europe and the Asia-Pacific. In this post, lets take a look at two components representing Singapore.

1.DBS Group Holdings Ltd. (DBSDY) is the largest bank in Singapore as measured by assets. DBS trades on the OTC markets in the USA. The current yield is 8.06%. On Dec 22, the company announced that it will raise $2.8B in a rights offering. The press release said”Proactive capital raising, initiated from position of strength, will make DBS one of the best capitalised banks in Asia”.

With very little or no exposure to the subprime mess in the US, DBS has a Tier 1 Ratio of 9.7% as of September 30, 2008. After the right issue, the Tier 1 Ratio will increase to 11.8%. These ratios are well above the minimum required by regulatory authorities.

2.United Overseas Bank Ltd (UOVEY) has “500 offices in 18 countries and territories in Asia Pacific, Western Europe and North America”. UOVEY trades on the OTC as well.It pays a dividend of 3.21%. Annual EPS growth in the last 5 years is 16.27%.

Do Dividends Matter ?

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Recently I came across the following research paper on the importance of dividends published by Dow Jones back in 2004.

ABSTRACT
“Numerous trends are examined that suggest recent increased interest in dividend income from equities is likely to continue and perhaps increase further well into the future. Existing equity indexes are found to measure a capital-gains-oriented investment strategy and not income oriented equity investment strategies. New design principles are described that are aimed at measuring the segment of the equity market that is income oriented. The resulting Dow Jones Select Dividend Index is backtested to 1991 and found to have outperformed many benchmark indexes.* Comparisons with other equity indexes find that it has also performed consistently with or better than indexes measuring conservative capital gains-oriented investment strategies.”

SUMMARY
Disenchantment with the recent bear market and the substantial reduction in federal taxes on corporate dividends in 2003 have sparked renewed interest among investors and money managers in dividend payouts. But a survey of the indexing field found no indexes available that measure the performance of companies that consistently pay dividends to their shareholders. Dow Jones Indexes took steps to fill that gap.”

To read more click Dividend Matter.

Source: Dow Jones