Perrigo: Worth Holding Onto

Perrigo Company (NDQ: PRGO)

Originally recommended on June 22/09 (IWB #2923) at $26.81. Closed Friday at $36.77. (All figures in U.S. dollars). The shares in this generic drug maker closed on Friday at $36.77 which means we are ahead 37.2% since my June recommendation, including a dividend of 5.5c a share received in August. The company is due to release first quarter 2010 results on Nov. 2, so certainly hold the stock until the earnings report comes out.

Perrigo has filed for permission to produce a generic version of Rogaine which, if granted, could have a very positive impact on the company's outlook. In other good news, Perrigo was released from a lawsuit that had been brought against them by Stiefel Laboratories which is a division of Glaxo SmithKline (GSK).

This stock and TEVA are two of my favorite generic drug plays and are particularly attractive given the context of the Obama healthcare program that is likely to be approved by Congress in the coming months. It is very likely that the use of generic drugs will be specified in the legislation so both Perrigo and TEVA should be long-term beneficiaries.

Action now: Hold.

Comments

[JPSmith:]

Perrigo has huge upside potential. With the ever-tightening restrictions on available retail shelf space, major chains are limiting more and more health and beauty product categories to one or at most two national brands plus the store brand equivalent (private label) product, which generates significantly higher retailer margins than the national brands....and Perrigo is far and away the #1 supplier of store brand equivalent products. This is a global trend.

Nov 03 05:13 PM