The market continues to rally, but the action feels a bit toppy at the moment. I think a key to making money in this market is to hit a lot of singles and to properly play sector rotation. To that effect, I took my 30% plus profits on Warren Resources (WRES) Friday morning as the energy sector has had a nice run since the first of the year. I redeployed those funds into the healthcare sector as the sector (XLV) has underperformed the S&P over the last month (See Chart). I re-initiated a position in Gilead Sciences (GILD) as I think that stock got oversold to open Friday morning. I also took a position in Endo Pharmaceuticals (ENDP).
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Endo Pharmaceuticals - "Endo Pharmaceuticals Holdings Inc., together with its subsidiaries, operates as a specialty healthcare solutions company in the United States. The company operates in three segments: Branded Pharmaceuticals, Generics, and Devices and Services" (Business Description from Yahoo Finance).
Six Reasons to pick up Endo Pharmaceuticals at under $35 a share:
The stock is selling at the bottom of its five year valuation range based on P/E, P/B, P/CF and P/S.
The company is showing impressive earnings growth. It earned $3.48 in FY2010, is expected to make $4.61 in FY2011 and analysts project $5.49 in EPS in FY2012.
The stock looks like it has bottomed, is showing increasing technical strength and just crossed its 200 day moving average (See Chart)
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The impact for Endo Pharmaceuticals of the shutdown of a Nebraska plant operated by Novartis (NVS) that produces key products for Endo Pharmaceuticals is likely to be short lived and concentrated in first quarter results.
The stock has grown EPS north of 21% annually over the last five years, yet is priced at about 6.5 times forward earnings. It also has a low five year projected PEG (.66).
The median analysts' price target on Endo Pharmaceuticals is $45. S&P has a "Buy" rating and a $46 price target on the stock.