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Research analyst, long only, dividend investing
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I've been singing love serenades for Abbott Labs’ (NYSE:ABT) stock for a long time. Call me materialistic, but my love for stocks is not ‘til death do us part’ ; it is conditional on fundamentals staying intact and on valuation - it has to be undervalued.

Abbott Labs’ fundamentals have improved over the last couple of years - it sold its medical device unit to General Electric (NYSE:GE) at a great premium and it “stole” a stent business from Guidant playing on Boston Scientific’s (NYSE:BSX) urgent need to close the deal.

Abbott’s management has proven the company to be a very shrewd operator. However, Abbott did what any good stock will do at some point (hopefully) – it appreciated and became fully valued. Though I still love the company, I had to say goodbye to Abbott’s stock. Hopefully, I’ll be able to buy it in the future on my terms, at a lower price.

I found a new ‘fling’ - Glaxo Smithkline (NYSE:GSK) – Abbott’s worthy replacement. GSK reminds me of Abbot’s stock about two years ago: decent (very similar to ABT) growth prospects ahead (earnings growth of about 7-8% a year) further helped by a growing industry, a strong balance sheet, great return on capital of close to 40%, fat 20% plus profit margins, and a competitive moat around its business that rivals the size of Lake Michigan.

All that coupled with great valuation of about 14x earnings and 3.3% dividend yield. On top of all that it comes with an added bonus, its dividend is paid in pounds and converted to dollars – if the dollar decline continues (my expectation), its earnings and dividends will rise in US dollars.

ABT vs. GSK 1-yr chart:

Source: Farewell Fully Valued Abbott Labs, Hello Glaxo Smithkline