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I seek to liberate investors from the chains of borrowed opinions by teaching metric awareness that leads to the formation of your own opinions. I am a retail investor that gathers, processes and analyzes significantly more data than average. I share that data in my articles. I let the data do... More
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  • Health Care / Pharma Stats 5-21-15

    The last BDC in my coverage universe has reported. I am now through (at least for the next two months) with writing BDC articles that very few read. There is a major concept in those articles that everyone should grasp - that a few simple rules can have a major impact on investing results. For BDCs, the two basic rules are (1) never buy an uncovered dividend and (2) never buy a falling NAV.

    Most BDCs have zero dividend CAGR projections. Due to that, one of the major rules of investing is almost irrelavant. And that simple rule - always invest with CAGR awareness. And by CAGR awareness - I mean awareness of the dividend's compound annual growth rate projection. I start with the consensus analyst projection and modify it so that my projection is also in alignment with earnings growth projections, dividend growth inertia and the dividend to earnings ratio. The year to date returns in the health care / pharma sector underline that rule - puts it in bold font - and follows it with three exclamation points.

    Let's start with a parsing of that data:

    The Importance of Factoids' CAGR Projections The following companies had Factoids' CAGR projections over 8.0 - or the better rated companies - at the beginning of the year: ABC, ABT, BCR, CAH, DGX, GILD, MCK, NVO, PRGO, STJ and TMO. Their mean price gain for the year is 15.32%. Their mean total return for the year is 15.82% - and 11 of the 11 beat the sector median yearly price gain.
    The following companies had Factoids' CAGR projections at or under 8.0 - or the lesser rated companies - at the beginning of the year: A, ABBV, AGN, AMGN, AZN, BAX, BAYRY, BDX, BMY, GSK, JNJ, LLY, MDT, MRK, NVS, PFE, RHHBY, SYK, TEVA and ZMH. Their mean price gain for the year is 4.51%. Their mean total return for the year is 5.59% - and 4 of the 20 beat the sector median yearly price gain.

    There are at least two in the lower CAGR group that I might give higher CAGR projections to when I reset CAGRs and the end of Q2-15 - with those two being A and AMGN. Both currently have CAGRs of 8.0. If those were included in the higher group, then only 11 of 13 would have beat the sector average. Add to that, CAGR projections are fuzzy numbers. An 8.0 projection should not be viewed as superior to a 7.8 projection - or inferior to an 8.2 projection. All three projections are eight-ish. Put in different words - there was some luck in my parsing of the sector with the 8.0 threshold. I always expect high CAGRs to outperform. The degree to which they have outperform is atypical. The degree to which none of the over 8 CAGRs have failed to underperform is very atypical.

    After the inclusion of those "ands, buts and ifs" - I am still left with a "WOW!" impression. Here is the unparsed year-to-date date and price to earnings ratio data:

    Health Care / Pharma Stocks 5-21-15

    Yield in the spreadsheet below is based on the Q2-15 dividend. Spreadsheet header abbreviations: Div = dividend; EPS = earnings per share; LTM = last twelve months; YTD = year to date. The dividend to EPS ratio is a measure of dividend safety. At this point in time, companies that pay dividends once per year have had their payouts divided by four and encoded in this data as if they paid a quarterly dividend. AZN pays two unidentical dividends per year. I take the sum of those dividends and divide by four to get a run rate dividend per quarter. COV merged with MDT an is no longer publicly traded. GILD has announced an intention to declare a $0.43/share dividend on Q2-15 earnings. That payment will come until calendar Q2. This data incorrectly shows a Q2-14 dividend to correctly reflect that there has been no dividend growth over the LTM. AGN's last day of trading (it was purchased by Actavis) was 3-16-15.


      12-31-145-21DivCurrentDiv/Div/Percent Change
    Company and tickerPricePrice/QuarterYieldEPS15EPS16PricePr+DivEPS15TargetDiv 1yrDiv 3yr

    Agilent Technologies(NYSE:A)40.9442.320.1000.9523.5%20.5%3.373.86-2.304.495.9313.29
    AbbVie Inc.(NYSE:ABBV)65.4465.650.5103.1148.2%41.3%0.321.88-1.633.5921.43na
    AmerisourceBergen Corporation(NYSE:ABC)90.16113.940.2901.0223.6%20.9%26.3826.7010.8131.8023.4041.03
    Abbott Laboratories(NYSE:ABT)45.0249.340.2401.9544.4%39.8%9.6010.66-4.4210.079.09-0.55
    Allergan Inc.(NYSE:AGN)212.59240.250.0500.082.3%1.9%13.0113.011.870.390.000.00
    Amgen Inc.(NASDAQ:AMGN)159.29163.840.7901.9333.0%29.9%2.863.352.907.5229.5139.81
    AstraZeneca PLC(NYSE:AZN)70.3869.860.7004.0166.5%68.6%-0.740.26-0.24-3.510.000.00
    Baxter International Inc.(NYSE:BAX)73.2967.540.5203.0852.1%50.2%-7.85-7.14-15.29-3.700.0018.41
    Bayer AG(OTCPK:BAYRY)148.62153.760.5261.3726.5%28.1%3.464.875.870.000.0011.63
    CR Bard Inc.(NYSE:BCR)166.62172.380.2200.519.8%8.8%3.463.72-2.2815.694.765.26
    Becton, Dickinson and Company(NYSE:BDX)139.16141.410.6001.7033.9%28.4%1.622.053.969.9610.0911.11
    Bristol-Myers Squibb Company(NYSE:BMY)59.0368.890.3702.1584.1%64.1%16.7017.96-2.2224.002.782.94
    Cardinal Health, Inc.(NYSE:CAH)80.7388.660.3871.7535.4%31.7%9.8210.782.5812.4612.8320.87
    Quest Diagnostics(NYSE:DGX)67.0673.880.3802.0631.9%29.7%10.1711.308.6816.8415.1541.18
    Gilead Sciences Inc.(NASDAQ:GILD)94.26111.220.4301.5515.8%15.6%17.9917.999.92-1.310.00na
    GlaxoSmithKline PLC(NYSE:GSK)42.7445.460.6956.1293.9%106.1%6.369.62-0.67-1.068.598.86
    Johnson & Johnson(NYSE:JNJ)104.57102.420.7502.9348.9%46.8%-2.06-1.34-0.490.167.147.65
    Eli Lilly and Company(NYSE:LLY)68.9974.270.5002.6963.3%57.0%7.658.38-1.5612.602.040.68
    McKesson Corporation(NYSE:MCK)207.58239.440.2400.407.6%6.6%15.3515.4616.3414.090.006.67
    Medtronic Inc.(NYSE:MDT)72.7078.410.3051.5627.8%27.4%7.858.698.407.580.005.77
    Merck & Co. Inc.(NYSE:MRK)56.7960.100.4503.0052.3%47.2%5.837.41-2.822.572.272.38
    Novo Nordisk A/S(NYSE:NVO)42.3257.630.1901.3246.9%40.9%36.1836.63-16.9250.51-8.4317.41
    Novartis AG(NYSE:NVS)92.66104.790.7052.6954.5%51.4%13.0914.61-11.939.183.684.88
    Pfizer Inc.(NYSE:PFE)31.1534.360.2803.2654.9%47.7%10.3011.20-8.118.017.699.09
    Perrigo Company PLC(NYSE:PRGO)167.16198.260.1250.256.5%5.6%18.6018.683.809.6119.0518.75
    Roche Holding AG(OTCQX:RHHBY)37.7237.180.2712.9257.1%51.4%-1.431.44-11.210.00-1.285.54
    St. Jude Medical Inc.(NYSE:STJ)65.0374.740.2901.5529.4%26.8%14.9315.82-5.959.377.418.70
    Stryker Corporation(NYSE:SYK)94.3396.400.3451.4327.4%25.0%2.192.93-3.279.2413.1120.66
    Teva Pharmaceutical Industries(NYSE:TEVA)57.5161.420.3532.3027.0%27.8%6.807.412.158.871.7311.75
    Thermo Fisher Scientific, Inc(NYSE:TMO)125.29132.840.1500.458.2%7.4%6.036.27-4.925.470.005.13
    Zimmer Holdings, Inc.(NYSE:ZMH)113.42114.460.2200.7713.8%13.0%0.921.30-0.632.970.007.41
    Zoetis Inc.(NYSE:ZTS)43.0347.800.0830.6920.0%17.3%11.0911.28-2.375.9113.79na

    Average    1.9236.6%36.6%8.439.28-0.698.866.6211.94

    With the 10 Treasury at 2.19% and the sector average yield [on Q2 Divs] at 1.92% - the spread is -27 basis points.
    The cap weighted ETF XLV is up 9.92% year to date - with dividends included, its total return is 10.22%.
    The yield on the XLV is 1.23% using the sum of LTM dividends - while LTM dividend growth is 8.19%.
    * The change in the dividend is for the last twelve months and not year to date.

    Dates used to credit dividends:

    A : 4-21-15ABBV : 5-14-15ABC : 5-31-15ABT : 5-14-15AGN: 03-05-15AMGN: 06-04-15AZN: 03-22-15BAX : 06-30-15
    BAYRY: yearlyBCR: 05-07-15BDX: 03-30-15BMY: 04-30-15CAH: 07-14-15COV:DGX: 04-21-15GSK: 07-08-15
    JNJ: 06-09-15LLY : 06-09-15MCK: 03-31-15MDT: 04-16-15MRK: 04-07-15NVO: yearlyNVS: 04-09-14PFE: 06-01-15
    PRGO: 06-15-15RHHBY: yearlySTJ: 07-30-15SYK: 07-30-15TEVA: 06-03-15TMO : 04-14-15ZMH: 07-13-15ZTS : 07-01-15

    Differences between my coverage universe and the XLV My coverage includes BAYRY, GSK, NVO, NVS and RHHBY - and those non-US companies are not in the XLV. The XLV includes significant weightings in non-dividend paying GILD (which has announced its intention to start paying dividends), CELG and BIIB. It has minor weightings in REGN, VRTX, MYL, BSX, ISRG, EW, MNK, LH and WAT.


      12-31-145-21YTD Change Earnings Per ShareP/E RatiosYahoo CAGR
    Company and tickerPricePricePriceEPSTarget 2013201420152016201420152016Q4-14Q1-15

    Biogen Idec Inc.(NASDAQ:BIIB)342.40401.1517.162.5226.43 89613831670193329.0124.0220.7521.2017.64
    Boston Scientific Corporation(NYSE:BSX)13.1717.8735.691.120.51 46849010221.2719.8617.5210.539.87
    Celgene Corporation(NASDAQ:CELG)113.35116.202.51-2.2617.03 29837147561931.3224.4618.7725.7625.46
    Edwards Lifesciences(NYSE:EW)129.90131.821.486.207.04 31335042846837.6630.8028.1714.8714.06
    Gilead Sciences Inc. 93.79111.2218.589.92-1.31 2048091086110213.7510.2410.0923.9613.22
    Intuitive Surgical, Inc.(NASDAQ:ISRG)531.24494.95-6.83-8.294.54 167316101660194330.7429.8225.473.503.58
    Laboratory Corp. of America(NYSE:LH)108.25120.3611.196.1527.44 69568077786817.7015.4913.878.759.90
    Mallinckrodt PLC(NYSE:MNK)97.91128.8131.5611.4335.48 31749474190126.0717.3814.3024.0928.79
    Mylan, Inc.(NASDAQ:MYL)57.6069.9421.42-0.7228.12 28935641346719.6516.9314.9814.2613.14
    Regeneron Pharmaceuticals(NASDAQ:REGN)413.48516.0024.79-5.4523.52 38110001110133551.6046.4938.6520.2118.86
    Vertex Pharmaceuticals(NASDAQ:VRTX)118.41125.055.61205.269.75 -198-314-116483nana25.8919.0029.90
    Waters Corporation(NYSE:WAT)114.35133.8417.04-2.5314.83 50454857863324.4223.1621.149.429.08

    Average   15.0218.6116.12     27.5623.5122.6916.3016.13

    The Predictive Power of the Dividend/EPS Ratio on Valuations: Dividend to EPS ratios range from as low as the single digits to the 80s - and may look all too random. But this ratio - during most time periods - helps explain the variety of yields and P/E ratios. There is some correlation to YTD price changes as well.

    The stocks that did not pay dividends had a YTD mean price gain = 15.02%. They had an average price/earnings ratio = 23.51. They had an average Yahoo CAGR projection of 16.13.

    In this sector, there are growth companies that have not been dividend growth companies. Having dividend/EPS ratios under 25% is a key indicator of irregular dividend growth. The following stocks had Q2-15 Dividend/EPS ratios of less than 25%: A , ABC , AGN , BCR , GILD , MCK , PRGO , TMO , ZMH . Their YTD mean price gain = 11.68% and 5 of the 9 beat the sector mean yearly price gain [8.43%]. Their mean yield = 0.66% and they had an average price/earnings ratio = 20.67. Their mean LTM dividend growth = 5.91% and they had an average CAGR projection of 9.74.

    The following had Q2-15 Dividend/EPS ratios of more than 25% - but less than 40%: AMGN , BAYRY , BDX , CAH , DGX , MDT , STJ , SYK , TEVA . Their YTD mean price gain = 6.63% and 3 of the 9 beat the sector mean yearly price gain. Their mean yield = 1.74% - and they sold at an average price/earnings ratio = 17.77. Their mean LTM dividend growth = 9.98% and they had an average CAGR projection of 7.69.

    The following had Q2-15 Dividend/EPS ratios of more than 40% - but less than 50%: ABBV , ABT , JNJ , NVO . Their YTD mean price gain = 11.01% and 2 of the 4 beat the sector mean yearly price gain. Their mean yield = 2.33% - and they sold at an average price/earnings ratio = 22.65. Their mean LTM dividend growth = 7.31% and they had an average CAGR projection of 7.50.

    The following companies had Q2-15 Dividend/EPS ratios of more than 50%: AZN , BAX , BMY , GSK , LLY , MRK , NVS , PFE , RHHBY . Their YTD mean price gain = 5.55% and 3 of the 9 beat the sector mean yearly price gain. Their mean yield = 3.32% - and they sold at an average price/earnings ratio of 20.63. Their mean LTM dividend growth = 2.86% and they had an average CAGR projection of 4.50.

    The Predictive Power of subsector on Valuations: There is a huge difference in the type of products or services that this universe produces. Could that difference account for differences in performance and valuation?

    The following stocks were in the Distribution sub-sector: ABC , CAH , MCK . Their YTD mean price gain = 17.18% and 3 of the 3 beat the sector mean yearly price gain [8.43%]. Their mean yield = 0.99% and they had an average price/earnings ratio = 20.82. Their mean LTM dividend growth = 12.20% and they had an average CAGR projection of 11.00.

    The following stocks were in the Medical devices sub-sector: BAX , BCR , BDX , MDT , STJ , SYK , ZMH . Their YTD mean price gain = 3.30% and 1 of the 7 beat the sector mean yearly price gain [8.43%]. Their mean yield = 1.51% and they had an average price/earnings ratio = 18.57. Their mean LTM dividend growth = 8.63% and they had an average CAGR projection of 7.44.

    The following stocks were in the Pharmaceutical sub-sector: ABBV , AMGN , AZN , BAYRY , BMY , GSK , JNJ , LLY , MRK , NVO , NVS , PFE , RHHBY , TEVA . Their YTD mean price gain = 7.52% and 4 of the 14 beat the sector mean yearly price gain [8.43%]. Their mean yield = 2.82% and they had an average price/earnings ratio = 20.34. Their mean LTM dividend growth = 6.03% and they had an average CAGR projection of 5.54.

    The following stocks were in the Diagnostic sub-sector: A , DGX , TMO . Their YTD mean price gain = 6.52% and 1 of the 3 beat the sector mean yearly price gain [8.43%]. Their mean yield = 1.06% and they had an average price/earnings ratio = 19.50. Their mean LTM dividend growth = 5.31% and they had an average CAGR projection of 9.27.

    Earnings Growth & P/E Ratios 5-21

    Fiscal and calendar years are not in sync. ABC, BDX, CAH, MCK, MDT and PRGO began fiscal 2015 at least one quarter earlier than calendar 2015. Several stocks sell at valuations based on their drug pipelines - and short-term growth in EPS fails to capture a growth picture which is expected to come in 2016 and beyond. BMY is a good example.


     Earnings / ShareEarn. GrowthP/E Ratios15 EPS Range
    Co.201020112012201320142015201613-1414-1515-16201420152016HighLowRange

    A2002953122883041701955.56%-44.08%14.71%13.9224.8921.701731664.12%
    ABBV0003143324234945.73%27.41%16.78%19.7715.5213.294414214.73%
    ABC21925127631439749255526.43%23.93%12.80%28.7023.1620.534754524.67%
    ABT0017420122821624113.43%-5.26%11.57%21.6422.8420.472202114.17%
    AGN10307414477665872103439.41%31.13%18.58%36.1327.5523.2488577013.19%
    AMGN521533651760870958105614.47%10.11%10.23%18.8317.1015.529759057.31%
    AZN560733641506428421408-15.42%-1.64%-3.09%16.3216.5917.124304202.38%
    BAX3984314534674903994144.93%-18.57%3.76%13.7816.9316.3145438517.29%
    BAYRY006887457997937497.25%-0.75%-5.55%19.2419.3920.537637412.77%
    BCR56064065757884090299545.33%7.38%10.31%20.5219.1117.329108961.55%
    BDX4905335375816257088467.57%13.28%19.49%22.6319.9716.727336896.21%
    BMY2162281991821851762311.65%-4.86%31.25%37.2439.1429.8219416019.32%
    CAH2222673213733844374892.95%13.80%11.90%23.0920.2918.134454303.43%
    DGX3982853924004104765122.50%16.10%7.56%18.0215.5214.4348943710.92%
    GILD16918117120180910861102302.49%34.24%1.47%13.7510.2410.09110582126.15%
    GSK99325353373296296262-20.64%0.00%-11.49%15.3615.3617.352812665.07%

     Earnings / ShareEarn. GrowthP/E Ratios15 EPS Range
    Co.201020112012201320142015201613-1414-1515-16201420152016HighLowRange

    JNJ4765005105525976146418.15%2.85%4.40%17.1616.6815.986305936.03%
    LLY474441339415278316351-33.01%13.67%11.08%26.7223.5021.163223123.16%
    MCK4624866386338351260145631.91%50.90%15.56%28.6819.0016.45109810811.35%
    MDT3223373463753824394451.87%14.92%1.37%20.5317.8617.624484352.96%
    MRK3423773823493493443810.00%-1.43%10.76%17.2217.4715.773483285.81%
    NVO921021421671671621860.00%-2.99%14.81%34.5135.5730.981761703.70%
    NVS4263783895015235175494.39%-1.15%6.19%20.0420.2719.095335075.03%
    PFE2222312192222262042351.80%-9.73%15.20%15.2016.8414.622262069.80%
    PRGO29340149956163976488813.90%19.56%16.23%31.0325.9522.337477035.76%
    RHHBY1371401621561561902110.00%21.79%11.05%23.8319.5717.621941835.79%
    STJ3013282393763983954335.85%-0.75%9.62%18.7818.9217.264003785.57%
    SYK33337240742347350355111.82%6.34%9.54%20.3819.1717.505104737.36%
    TEVA4544975355015075235081.20%3.16%-2.87%12.1111.7412.095304937.07%
    TMO27141649454269673481228.41%5.46%10.63%19.0918.1016.367407281.63%
    ZMH4334805305756066366755.39%4.95%6.13%18.8918.0016.9669060912.74%

    BDC Average     16.95%7.18%9.35%21.3920.0718.21  11.50

    May 22 9:41 AM | Link | Comment!
  • MLP Investor Should Upgrade Their News Source

    Most of those who follow me already know I am a poster on the BDC and MLPs boards at Investor Village. Many of you lack the time to spend reading a busy message board. It is also true that many messages on a message board are a waste of time to read.

    With that being the case, I want you to stop and ponder the following evidence. Here is a news article on the Deutsche Bank analysts ratings on MLPs. And here is the Investor Village posting on the Deutsche Bank ratings. Which is the better source.

    I would also like you to view the Investor Village MLP board main page. Note the (as I write this) 31 'recs' for the Deutsche Bank article. The Investor Village readers are pointing you to which messages to read - and which to ignore. I pause to read messages where the 'recs' are high.

    At Seeking Alpha we have 'likes'. At Seeking Alpha, it is my impression that we have failed to attain the degree of reader participation that would assist us in guiding our reading. Seeking Alpha lacks an audience that participates in my occasional polls. Seeking Alpha lacks enough readers who provide comments to good articles - and comment numbers can be a guide to finding the better articles.

    Be the change that you want to see in this world.

    May 19 1:01 PM | Link | Comment!
  • AINV NAV Falls

    AINV Reports NII of $0.2199 compared to a Dividend of $0.20 Business Wire 5-19-15

    What They Earned: Apollo Investment Corporation reported for Q1-15 Total investment income of $102.115 million ($0.4313/share). Net investment income was $52.071 million ($0.2199/share). The net asset value per share was $8.18 compared to $8.43 at the end of Q4-14 due to the portfolio (which we knew was heavy in energy loans) having $63.8 million of $0.2695/share in realized and unrealized gains.

     Q1-15Q4-14Q3-14Q2-14Q1-14Q4-13

    Total investment income102.115110.026118.910102.58094.56194.561
    Net investment income52.07156.66265.68853.20149.68349.683
    Investments @ fair value3.3503.5143.6653.6453.4793.184
    Wt Av Share Count236.741236.741236.741236.741236.741224.741
    TII/share$0.4313$0.4647$0.5023$0.4333$0.3994$0.4207
    NII/share$0.2199$0.2393$0.2775$0.2247$0.2097$0.2211
    NAV/share$8.18$8.43$8.72$8.74$8.67$8.57
    Wt Av Yield11.2%11.1%11.0%11.1%11.1%11.4%

    NII was on target

    Earnings EstCurrent Qtr.
    Mar 15
    Next Qtr.
    Jun 15
    Current Year
    Mar 15
    Next Year
    Mar 16
    Avg. Estimate0.220.220.970.87
    No. of Analysts14.0011.0013.0013.00
    Low Estimate0.170.170.910.64
    High Estimate0.240.240.980.99
    Year Ago EPS0.220.230.910.97

    TII was slightly below target

    Revenue EstCurrent Qtr.
    Mar 15
    Next Qtr.
    Jun 15
    Current Year
    Mar 15
    Next Year
    Mar 16
    Avg. Estimate104.89M104.99M436.49M422.33M
    No. of Analysts7567
    Low Estimate100.66M101.89M432.00M396.00M
    High Estimate111.70M109.90M443.20M452.10M
    Year Ago Sales96.40M102.58M381.35M436.49M
    Sales Growth (year/est)8.80%2.30%14.50%-3.20%

    A fall in NAV was expected. What I do not know was the projected size of the NAV fall. I am not aware of publicly available information where a NAV projection can be attained.

    Tags: AINV
    May 19 9:53 AM | Link | Comment!
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