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Paul Leibowitz

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  • 4 Reasons I'm Adding Gilead To My Healthcare Holdings [View article]
    "Anything E trade or any analysts tells you is "cash flow" is completely useless."

    @Dothemathman:

    I wrote FCF, not CF.

    And, I also wrote that "there are problems with that, too."

    Your point is what?

    (BTW, you avoided commenting on whether you agreed with Warren Buffett that *your* use of EBITDA is questionable ... at best.)
    Dec 24, 2014. 12:22 PM | Likes Like |Link to Comment
  • Gilead Feels The Heat Of Competition [View article]
    "But haven't PBM been doing this for years, i.e. restricting formularies for discounts?"

    This sentence got me thinking. Thanks for it, ckarabin !

    PBMs aggregate the buying clout of millions of enrollees through their client health plans, enabling plan sponsors and individuals to obtain lower prices for their prescription drugs through price discounts from retail pharmacies, rebates from pharmaceutical manufacturers, and the efficiencies of mail-service pharmacies. http://bit.ly/1CCcHpB

    OK. So this creates efficiency. I get that. But, once a PBM tries to decide on medical treatment, then this should challenge whether the PBM model needs to change.

    So, how about this?

    For those *insurers* using ESRX, GILD strikes a deal with each of these insurers to provide Harvoni. It can work out favorable financial terms with the insurer and make Harvoni available through a different PBM's formulary on this one-off basis.

    Loony idea ... or not?

    Comments please.
    Dec 24, 2014. 12:17 PM | 1 Like Like |Link to Comment
  • 4 Reasons I'm Adding Gilead To My Healthcare Holdings [View article]
    "Stocks are priced off EBITDA, not earnings, so factors such as Depreciation (the D) and Taxes (the T) meaningfully affect the valuation."

    @Dothemathman,

    Boy, you sure do confuse.

    “References to EBITDA make us shudder ... We’re very suspicious of accounting methodology that is vague or unclear, since too often that means management wishes to hide something.” Warren Buffett

    If I had to chose one, it *might* be FCF ... but there are problems with that, too.

    BTW, nearly every single company is valued on its future prospects.

    Your calculations pertain to what already happened.
    Dec 24, 2014. 12:00 PM | 7 Likes Like |Link to Comment
  • AbbVie Versus Gilead In Hepatitis C, With Comments On Biotech [View article]
    @DoctoRx,

    Thank for another excellent article. After mulling this topic over, I would like to share my thoughts.

    The patients with the biggest dilemma are those who are employed by a company offering no choices other than one plan that uses ESRX.

    Those on private plans, and also on Medicare, have choices ... and can switch.

    My view is that people will choose a different insurer ... if that insurer has Harvoni in its formulary.

    The switch will be by patients preferring Harvoni. After all, to a patient there really is no meaningful difference between PBMs. It's the insurer's plan that matters most. Now, patients will look to see if the insurer's plan uses ESRX.

    And, why not? Who's life is it anyway?

    Here's the thing. The switch will be by persons known to be sick thereby tilting the population to a higher risk pool. I would expect any insurer to rightfully compensate itself for that added risk two ways:

    (1) negotiating a larger profit from GILD; and
    (2) larger co-pay for Harvoni than for Viekira.

    It would not surprise me if ESRX wants to keep patients using Viekira because ESRX doesn't get hit with other medical treatments, as do the insurers.

    To ESRX, it's money.

    However, I don't understand why ESRX would agree to any period of exclusivity instead of a "favored nation" clause (meaning it would agree to less favorable terms from GILD over ABBV in order to extract the most from ABBV and hold onto a larger population of patients.

    Personally, I think ESRX is stupid.

    By coincidence, this is all happening during enrollment season.

    I expect GILD to announce something soon. However, provided that no other PBM enters into an exclusive arrangement with ABBV, the formularies of other PBMs can change even after enrollment periods ends.

    This puts lots of patients, GILD, the PBMs, and insurers in the hot seat, as follows:

    (a) Patients may switch to plans *hoping* Harvoni is covered.

    (b) I expect PBMs to try to extract an even higher profit from GILD.

    However, GILD doesn't have to match ABBV's price structure, and could likely charge more than ABBV while pass some of the extra profit on to the PBM over what ABBV is giving.

    Thus, I do expect GILD to lower the cost, but to charge a premium.

    (c) The insurers covering all medical care are in the worst predicament because of the tilt towards a sicker population.

    The insurer can't raise the monthly/annual premium too much or else it risks being non-competitive with other insurers in the same territory.

    Instead, all insurers should be calculating whether the overall cost of treating such patients will *decrease* if Harvoni is used instead of Viekira, and also build in a sufficient profit from GILD and through co-pays from patients to cover their asses.

    (d) GILD has work cut out for it.

    But, given my thoughts above, I remain optimistic.
    Dec 23, 2014. 10:07 AM | 2 Likes Like |Link to Comment
  • AbbVie Versus Gilead In Hepatitis C, With Comments On Biotech [View article]
    "Gilead has about a zero tangible book value. I have written more than once on SA about Gilead's pipeline - which I admire."

    DoctoRx,

    ABBV's Tangible Book Value Per Share is LOWER than GILD's and is $-1.82 (As of Sep. 2014):
    http://bit.ly/1zPm0yM

    Gild's is $0.72 (As of Sep. 2014):
    http://bit.ly/1zPm01M

    Agree about the pipeline.

    GILD is down, but not out. Hoping for something creative and bold from GILD regarding other PBMs and pricing.

    Long GILD (no position on ABBV)
    Dec 22, 2014. 08:06 PM | 2 Likes Like |Link to Comment
  • The Dividend Growth Investor's Version Of 'A Christmas Carol' [View article]
    "Notice all of your graphs are always presented w/o dividends being reinvested. Wondering the reason for that."

    @16178052,

    I don't want to answer in place of Chuck, but want to offer my own opinion.

    My preference has always been for performance to be shown without reinvesting dividends because, doing it this way, a larger audience is addressed that includes:

    (a) retirees who live of dividends and don't/can't reinvest; and
    (b) those who prefer to capture dividends in cash and reinvest them in other companies trading at better valuations than the issuing company.

    In other words, not all investors reinvest dividends.

    Those who want to know the effect of reinvesting dividends into the issuing company can use websites that provide this information. Of course, users of FAST Graphs can do so with a click of a button.
    Dec 20, 2014. 01:47 PM | 3 Likes Like |Link to Comment
  • The Dividend Growth Investor's Version Of 'A Christmas Carol' [View article]
    Chuck,

    Whereas this article stems from your motivation to conduct a review of some of your initial contributions and lessons learned, it caused me to reflect on the invaluable lessons that I learned from you.

    There is a very small list of authors that I routinely follow. All have the same underlying characteristic of being people who have earned my trust. You remain at the top of that list.

    My best wishes to you and your family for a healthy and happy New Year.

    Paul

    +++++++++++++++++++
    BTW, A few days ago, I just happened to use FAST Graphs before Polly send out her email informing subscribers of the new enhancements. My eyes popped wide open. The enhancements include calculations that, until now, I had to do by hand. More so than ever before, FAST Graphs keeps the lead, and is well ahead of the pack, in being one of the most valuable tools available to all investors.
    Dec 20, 2014. 11:17 AM | 7 Likes Like |Link to Comment
  • General Electric: You Ain't Seen Nothing Yet [View article]
    David,

    The only problem I have with this article is not knowing if I liked it due to "confirmation bias."

    I have been long GE for what seems to be forever, and even bought more at the depths of the financial crisis.

    Today, GE represents over-sized positions for me in two different accounts, positions that I decided not to trim because I like GE's business and recognize that Immelt has had a very tough job dealing with GE Capital, not just the effect of the global meltdown on GE's other businesses.

    I see very little risk to GE ceasing to exist and see far more upside than downside.

    I, too, want capital appreciation but am content waiting while receiving growing dividends.


    +++++++++++++

    To various commenters:

    Please don't remind me of the dividend cut that no one saw coming because, if you do, then also convince me that you yourself saw the coming of the far more important global financial meltdown affecting more companies than GE, especially the banks.

    For those who may not know this, GE Capital was declared by the regulatory authorities to be Systemically Important:

    http://1.usa.gov/1w5TQe2
    http://bloom.bg/1w5TSlW

    Just now happened to MET:
    http://reut.rs/1w5TQun

    That's a big deal.

    In GE's case, better to fault Welch for moving in this direction, not Immelt.

    In GE's case, if you wish, then fault Immelt for not solving the impossible to solve overnight or more quickly than is possible.
    Dec 19, 2014. 09:54 AM | 3 Likes Like |Link to Comment
  • It's New! It's Nifty! It's The Dividend Growth 50! [View article]
    "Any and all comments about things you could have done differently are fair, but since it's your index, and you have invested your own money in it, in my opinion it is unassailable."

    @David Van Knapp,

    In thinking about the placement of your comment in this thread, it seems likely that it was written defensively in response to my comment.

    If so, then you are very mistaken to interpret what I wrote as criticism of how Mike assembled the DG50.

    There are many ways to analyze data. I merely proposed that it would be of interest to review the long term performance of high vs low conviction picks from the panelists (taken as a group, not individually).

    The top 10 selections of the panelists could be viewed as a "high conviction" selection (it's their top 10).

    If only three (or some other small number) companies were picked by all 10, I would be curious to learn whether the performance of these companies is materially different than those companies NOT named by all 10 in their top 10 selections.

    In other words, what's the relative performance of high conviction picks (in this case, three) relative to the conviction that went into each of the panelists picks for their top 10s, and to the DG50.

    This could take the form of one article per year.

    What makes this interesting is that, in Mike's words, he picked a "cross-section of experienced investors and relative youngsters, as well as those with different philosophies, time frames and goals."

    Yet, these differing panelists seemed to have strong conviction over the same small number of companies.

    Mike understood and agreed that conviction is an interesting subject and he will consider it in follow-up articles.

    I agree with Mike that "the DG50 is more representative of the kind of portfolio a DGI might put together."

    Paul
    Dec 18, 2014. 08:08 PM | 1 Like Like |Link to Comment
  • It's New! It's Nifty! It's The Dividend Growth 50! [View article]
    Mike,

    Your entire series was very worthwhile for investors of all types, regardless of their differing styles and strategies.

    The entire exercise was made even more useful and important owing to related articles written by Chuck Carnevale, Minutemen, and Dale Roberts without which debates a fuller understanding of conflicting style/strategies would not have surfaced.

    My hat's off to you for creating a portfolio that eliminates the usual criticism voiced by so many others.

    I have a question.

    You wrote: "Yes, this portfolio and what will always be referred to as the Dividend Growth 50 (or DG50) from now on is the consensus 50 from Part 1. Sorry if I didn't make that clear."

    In Part 2, you wrote: "In all, 48 companies appeared on the Top 10 lists."

    Looking at it this way, all 10 panelists showed high conviction to these 48 top 10 companies.

    The companies now appearing in this article (the DG50) were taken from Part 1 and are not from the top 10 selections of each panelist.

    Rather, the selection was based on whether all panelists named a company in their top 50 choices (from "Companies Named By 10 Panelists" down to "Companies Named By 3 Panelists" but not lower than "3").

    Thus, companies *not* named by (for example) less than half the panelists could be considered to be companies viewed with low conviction.

    My question is this:

    Of the companies making it into this "Dividend Growth 50" (DG50) portfolio, have you looked to see which ones were "Companies NOT Named By 5 or Fewer Panelists"?

    I picked "5" for no particular reason. Companies NOT named by all 10 might be even more interesting.

    This subject might very well make for an interesting series of parallel articles on the subject of whether conviction mattered at the time of selection by the panelists.

    As an aside, I own 32 on this DG50 list. However, I own a bunch more of the "36 that didn't quite make the Greatest Hits compilation" in your part Part 2 article.

    Paul

    +++++++++++++++
    @David Van Knapp:

    "Great job. I look forward to 17 years of articles. Actually, I just look forward to 17 years."

    ROTFL

    Me, too !
    Dec 18, 2014. 11:46 AM | 8 Likes Like |Link to Comment
  • Dividend Growth Investors Focused On Income Earn Higher Total Returns [View article]
    "I suggest that your entry point will have very little affect on your long term success (20-50 years of investing)."

    OK,

    I'm outa' here ...
    Dec 15, 2014. 06:05 PM | 4 Likes Like |Link to Comment
  • Dividend Growth Investors Focused On Income Earn Higher Total Returns [View article]
    "The performance of the hypothetical portfolio (nothing wrong with looking at it though) should be viewed in the light of the fact that the 'real time' portfolios of some of the contributors to the list of this hypothetical basket has lagged - in total return - the performance of VDIGX and SDY or even the (annually rebalanced) 60/40 VTI/TLT portfolio. I am just talking about the total return here, so no need to bring up the fact that those portfolios were constructed with different objectives. "

    Well, Varan ... answer me this:

    (1) What's your point when you say the "portfolios of some of the contributors to the list of this hypothetical basket has lagged" something else (such as you say, VDIGX, SDY, or a 60/40 VTI/TLT portfolio)?

    I would expect some investors to do better or worse than others.

    In fact, I'd expect certain funds or indices to do better or worse than others.

    In fact, I would expect the returns of VDIGX, SDY, or a 60/40 VTI/TLT portfolio to be different from one another.

    (2) Why would you write: "I am just talking about the total return here, so no need to bring up the fact that those portfolios were constructed with different objectives."

    Really?

    "No need to bring up the fact that those portfolios were constructed with different objectives"?

    Seriously, really?

    Objectives matter.

    Isn't that a big reason why investors choose different strategies and build portfolios with different compositions from one another?

    I would expect (hope) people reading this article and its comments to be trying to improve their returns (whether it be exclusively for income or the highest possible total return or some blend), each striving to meet or beat their own personal benchmark as set by their individual goals and objectives.

    (3) Is it possible to make any point if objectives are ignored?

    (4) Is so, then what's the point of your comment if objectives are ignored?

    Hint: Not all investors are a total return investors. And, some who choose to boost total return may also purposely choose equities with less growth than might be chosen by others ... and vice versa ... in which case their total returns would be different ...

    ++++++++++++++
    FWIW: I'm a total return investor who invests mainly in dividend-paying companies.
    Dec 13, 2014. 07:02 PM | 6 Likes Like |Link to Comment
  • Dividend Growth Investors Focused On Income Earn Higher Total Returns [View article]
    Martin,

    Think of it this way:

    At the time of Dale's analysis, VDGIX had a known fixed composition. Dale then back-tested.

    At the time, Dale used Mike's Nifty-Fifty ... and then back-tested.

    However, not one of the panelists agreed on the composition of the New Nifty-Fifty and most certainly would not have picked the same stocks back then any more than the composition of VDGIX is guaranteed to have the same composition next week.

    In Mike's words: "Though some critics claim DG investors all pick the same stocks, the 10 panelists agreed on only five names. Several selections don't even pay dividends, as attempts were made to identify great companies that eventually might be aggressive income growers. And so, we are reminded once again that DGI isn't a one-size-fits-all strategy."

    In fact, even Mike didn't pick the same 50. However, Mike labeled himself as "boring" because "39 of the 50 companies [he] selected ended up being part of the panel's consensus."

    What everyone wants to know is the relative performance of today's composition of the VDGIX compared to the consensus-derived New Nifty-Fifty.

    Best to check back in 10 years for articles by Mike, Dale, and Chuck.

    That oughta be fun : - )

    ++++++++++++++++++++++
    Chuck,

    Not sure you planned it this way but I laughed through the whole article.

    Thanks, for that.

    (Here's hoping that Dale chimes in which case the comment thread could top 1,000 and our computers will crash loading the page.)
    Dec 12, 2014. 03:12 PM | 11 Likes Like |Link to Comment
  • Ambarella Has Proven Itself To Be A Winner, And Will Continue To Show Impressive Growth [View article]
    "I actually think that the two companies could merge."

    Alan,

    I hope not. In my view, AMBA has far more large markets available to it than GoPro.

    But, if it happens, I would imagine that AMBA should be the surviving company. However, this would likely eliminate the opportunity to sell to GoPro's competitors.

    Today, I imagine that AMBA could sell related products provided they have different specs than those sold to GoPro. (I did not search for any publicly available agreements between AMBA and GoPro, so I don't know. Do you?)

    Long AMBA
    Dec 11, 2014. 04:27 PM | Likes Like |Link to Comment
  • Kinder Morgan: Buy The Dip, It Will Not Last [View article]
    @fi-slut

    Josh Peters touches on this topic, here: http://bit.ly/1usYF1s

    While listening/reading keep in mind that it doesn't matter if a company is a MLP or C-Corp.

    I culled some of the text and pasted it below.

    "Magellan Midstream Partners (MMP), one of my favorites--actually my top holding of any sector in our portfolios--most of that business is a refined-petroleum products delivery system that runs up and down the middle of the country, connects refineries to the terminals that then load the trucks that carry gasoline to gas stations.

    The price of crude oil going down and dragging the gas price down might actually be a net positive if it spurs additional consumption, because they are paid based on throughput--how many barrels of refined products they are carrying. And then you've got a lot of varying degrees of sensitivity in between.

    But here's a good way to think about it: If the partnership is close to the wellhead--they are really involved in a lot of gathering and processing activity and perhaps putting a lot of capital in and growing their business very quickly with the growth of output from these different shale formations--then you have to be a little bit worried, maybe not about this price drop. But if prices stay low over the next couple of years, drying activity could slacken quite a bit. You expect producers to cut back on investment if the oil price is low and those projects are no longer economical. With that, you could see growth within a couple of years--again, if the oil price does stay low--start to disappoint.

    And for that reason and for many other reasons, I tend to prefer those partnerships that are more driven by energy consumption--what you might think of as consumers pulling as opposed to producers pushing energy into these logistic systems."

    BTW, love your handle : - )

    +++++++++++++++++++++++
    David,

    I've not had a chance to dissect KMI's operations from this perspective. Given your knowledge of KMI, my hope is that you already know and can easily comment.
    Dec 11, 2014. 04:01 PM | 1 Like Like |Link to Comment
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