Playing Dr. Reddy's Meteoric Rise

Includes: RDY, TEVA
by: Glenn Rogers

We originally recommended Dr. Reddy's Laboratories (NYSE:RDY) on June 22, 2009 (IWB #2923) at $15.30. The stock closed Friday at $24.02 (all figures in U.S. dollars).

We recommended the stock in June at $15.30 and it closed on Friday at $24.02 for a gain to date of 57%. The shares moved up steadily all summer and were recently pushed higher again after the company announced second quarter 2010 profits that were more than double last year's.

I still like this Indian generic drug maker but it has had a meteoric rise so I would take half profits now. If the market pulls back you'll get an opportunity to buy back your stake at a lower price. If that doesn't happen, at least you are locking in profits and playing with the house's money.

I think Dr. Reddy's and TEVA Pharmaceuticals (NYSE:TEVA) should be core holdings as we continue to migrate towards health care reform in the U.S. The large generic drug makers should benefit regardless of what plan ultimately makes it to President Obama's desk.

Action now: Take half profits.

Disclosure: Author holds long positions in both RDY and TEVA