There’s nothing on Wall Street that will bring you more ridicule in real time, and praise in good time, than buying low. The guy who buys at the bottom is always catching a falling knife while being eye-rolled by everyone else. Somebody’s got to do it though. Otherwise, there would be no bottoms. The criticism is even worse when indexes are at all-time highs and momentum-chasing is still in vogue.
Ridicule for buying low isn’t restricted to individual traders taking this or that position. It’s the same with companies in mergers and acquisitions. A company reaches out to buy a struggling competitor whose stock has been hated for years and gets criticized. AbbVie (NYSE:ABBV) is feeling that same heat now with its proposed buyout of Allergan (AGN). Nobody likes Allergan because it’s down 50% from all-time highs hit July 27, 2015. Two months later, Hillary Clinton sent out that pharma-smashing tweet about price gouging, sending the whole healthcare complex into a tailspin, and Allergan never recovered.
There are other good reasons why Allergan has fallen so hard these last four years. You can find them in every negative article on the proposed merger and I can’t really argue with them. But what can certainly be said is that after a 50% price decline, no company looks great as sentiment is negative to the point that touching the stock’s shadow makes you unclean. Sentiment is much worse than it was in 2015, but Allergan is a much better value now than it was then. AbbVie sees this and is making its move.
Analysts are calling the deal boring, more of the same, and a combination of two challenged businesses. That may all be true, but being boring, more of the same, or combining two challenged businesses doesn’t make the deal bad. I wonder what the same deal would
