Dear Mr. Berko: In the summer of 2008, when the stock market was tanking, I had $1,500 to risk and bought 50 shares of Actavis PLC at $21. Now my husband is pressuring me hard to sell. He wants me to invest the money in another issue with the same growth potential. We discuss this, sometimes heatedly, several times a week. I’d appreciate your recommendation.
— ST, Moline, Ill.
Dear ST: Your $1,500 investment in Actavis grew to $15,000 in 7 years. How swell to be a lucky lady. If you follow your husband’s advice and purchase another stock with the same growth potential, your $15,000 would grow to $105,000. The key word here is “if.” And “if a frog had wings, it wouldn’t bump its butt on the ground.” I think your husband’s jealous of your success. Ask him to find another issue with the same potential, and when he does ,sell half your Actavis and let him invest the proceeds. My dad used to say that divorce is bounty from the mutiny. So you must decide if it’s worth $7,500 to save a marriage.
Some say that the Lord invented whiskey so the Irish couldn’t control the world. And Actavis PLC (ACT-$299), a global pharmaceutical, home-ported in Ireland, has grown revenues from $2.5 billion in 2008 to about $15.3 billion this year as earnings improved from $1.89 to $16.00 per share. And a good portion of that growth derives from a brilliant Irish acquisition strategy. After all: “fee-fi-fo-fum,” who can resist the charms of an Irishman? This integrated, global, specialty pharmaceutical company designs, manufactures, markets and distributes more than 750 generic, branded generic, brand name, biosimilars, over-the-counter products and pharmaceuticals in 60 countries. And since you bought ACT, those Irishers have been busy acquiring Arrow Pharmaceutical, Watson Pharmaceuticals, Specifar, Warner Chilcott and Forest Labs. And, in May, the lads bought Allergan.
Allergan (well-known for Botox) is also a leader in ophthalmics, dermatology, neuroscience drugs, urologics and cosmetics. Allergan will increase ACT’s revenues to $24.5 billion in 2016 and, accordingly, should accelerate ACT earnings to $22.25 per share next year. The Allergan deal has an impressive and fecund drug pipeline that includes new therapeutics for Botox and sustained-release products for retina diseases. That’s cool beans! While the merger has Wall Street’s blessing, some wonder if the boys from Dublin are overextending themselves with four large acquisitions since 2011. However, management is mindful that they must cautiously measure their steps for a few years.
