Category Archives: stocks

Allergan, Pfizer Strike Off Down Separate Paths After Merger Killed

Big pharma Pfizer ( PFE ) contemplated splitting itself, while specialty drugmaker Allergan ( AGN ) campaigned to regain investor confidence Wednesday, after the two companies announced that their planned merger was off. Pfizer early Wednesday confirmed rumors that the companies had canceled their $160 billion merger, two days after the Treasury Department released new guidelines that would have removed most of the tax benefits of the deal for New York-based Pfizer. After its stock tanked Tuesday, Allergan’s CEO went on a media blitz to promote his company’s prospects as a stand-alone. On a conference call with analysts Wednesday morning, Allergan CEO Brenton Saunders maintained that Treasury’s action against tax inversions  will have no impact on the stand-alone Allergan, which redomiciled to Ireland through an inversion deal with Warner Chilcott three years ago. The company will retain its 14% corporate tax rate, he said, and it should also be free to deploy capital however it chooses. Saunders also said Allergan’s $40 billion sale of its generic unit Actavis to Teva Pharmaceutical Industries ( TEVA ) is unaffected by the spiking of the Pfizer deal  and is on track to close in June. The timeline for that buyout was delayed from its original Q1 closing date, as Teva works its way through a multi-country regulatory clearance process, but Saunders said the two companies are determined to get it done. “Teva is doing a lot of work,” said Saunders. “They’ve restructured their company; they have named their entire leadership through a few levels that include 200 Allergan executives moving to Teva. … This is a great deal for Allergan, but also a great deal for Teva.” Allergan stock, down 15% Tuesday, rebounded 3.5% Wednesday, to 244.74. Teva stock rose 4% to 56.73. Allergan Hunts For Growth Assets The closing of the Actavis sale should give Allergan a big wad of cash, so many of the analysts’ questions on the call related to what it will do with the money. Several seemed to be rooting for share buybacks, given that Allergan stock is trading near a 52-week low in the wake of the Pfizer breakup. Saunders said all options are on the table, but he emphasized that Allergan’s “growth pharma” model means that it’s constantly on the hunt for growth assets. He said that Allergan’s business-development team has stayed active since the Pfizer deal was announced, and if the right opportunity came along “we could announce it tomorrow.” A couple of analysts raised the name of contact-lens giant Bausch & Lomb, with which Saunders has a personal history. He headed the company from 2010 until 2013, when it was sold to Valeant Pharmaceuticals International ( VRX ) for $8.7 billion. Given Valeant’s recent spectacular crackup , many on Wall Street have speculated that B&L might again go on sale, with Allergan a suitable buyer not only because of Saunders, but also because of Allergan’s large ophthalmology business. Saunders’ response to this seemed to be a swipe at Valeant’s infamously opaque financial reporting. “It sold for $8.7 billion three, four years ago, with a late-stage pipeline of 30-some programs, and a strong organic growth profile,” he said. “I can’t tell that any of those things today are still true. Based on public information, it’s impossible to tell that it’s worth more than it sold for four years ago.” Pfizer Split-Up Could Move Up Pfizer, meanwhile, rose 5% to 32.93, hitting a four-month high, as investors looked toward another possible major catalyst for its stock. Back in 2013, the company reorganized so that it would be able to split its innovative drug-development business from its established products, and perhaps divide itself into more pieces if necessary. The company had originally planned to make a decision on that this year, but when the Allergan buyout was announced, the issue was pushed into next year. In Pfizer’s press release announcing the end of the Allergan deal, however, it said the decision date is back to this year. That itself could bring some more M&A, writes Evercore ISI analyst Mark Schoenebaum. “After a recent acquisition of Hospira, Pfizer probably has critical mass to transform its Global Established Products business unit to an independent company, but Innovative Products business units might benefit from additional assets acquired from outside,” Schoenebaum wrote in an email to clients. The prospects of both companies going back on the hunt may have been what lifted drug stocks as a whole Wednesday, especially biotechs. Distressed big-cap biotech Biogen ( BIIB ), which has been subject to buyout speculation given that it’s trading 35% off its high, rose 5.3% to 279.57. Smaller Anacor Pharmaceuticals ( ANAC ) rose 16% to 73.20, likely because its late-stage eczema drug is seen as a fit for Allergan’s dermatology portfolio.  

3 Mutual Funds To Buy On A Resurgent Chinese Economy

The Chinese economy has been at the root of the broader market malaise since the start of 2016. But, the world’s second largest economy showed signs of improvement in March. China’s factory indicators point to a pickup in the economy supported by greater stability in the yuan and a rise in its stock markets. Pressure on emerging markets including China eased due to the Federal Reserve’s cautious stance to hike rates in the future. Higher rates in the U.S. mostly results in outflows from these markets. China’s service sector also expanded last month, which bodes well for the country’s long-term goal of transforming into a consumer-driven economy. Increase in stimulus measures from Chinese authorities helped the service sector to move north. Given the recovery in manufacturing and services, it will not be unwise to invest in mutual funds that are exposed to the Chinese economy. When you add industrial profits gaining immensely in the first two months of this year and consumer sentiment touching record levels last month, China doesn’t seem to be in a bad proposition. Before we cherry pick some good funds, let’s take a look at the latest data: Manufacturing Expands After eight consecutive months of decline, China’s official manufacturing PMI came in at 50.2 in March. Any reading above 50 indicates expansion. There has also been a marked improvement in production and new orders. The production index went up to 52.3 in March from 50.2 in February, while the new orders index rose to 51.4 from 48.6 in February. A separate indicator, the private Caixin manufacturing PMI, rose to 49.7 in March from 48.0 in February. In spite of being below 50, it turned out to be the index’s highest reading in the past 13 months. Caixin Insight Group Chief Economist He Fan pointed out that “the output and new order categories rose above the neutral 50-point level, indicating that the stimulus policies the government has implemented have begun to take hold.” China-focused funds such as the Oberweis China Opportunities Fund (MUTF: OBCHX ) and the Matthews China Fund (MUTF: MCHFX ) are poised to benefit from this uptick in factory output. These mutual funds have invested in companies such as Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM ), China Mobile Limited (NYSE: CHL ), CNOOC Ltd. (NYSE: CEO ) and Tencent Holdings ( OTCPK:TCEHY ) that are direct beneficiaries of a rise in factory activities. Services Gain Momentum China’s official non-manufacturing PMI rose to 53.8 in March from 52.7 in February. This showed expansion in the service sector, which has become a major source of economic and employment growth in the country. Sub-indices of the non-manufacturing PMI including the new orders index, input price index, and sales price index all improved in March. The non-manufacturing PMI generally includes retail, aviation, technology, telecommunications, financials and construction sectors. Funds such as the AllianzGI China Equity Fund Class A (MUTF: ALQAX ) and the Eaton Vance Greater China Growth Fund Class A (MUTF: EVCGX ) are positioned to immensely benefit as they have significant exposure to the aforementioned sectors. 3 China-Focused Mutual Funds to Invest In Rise in both industrial and service activities in China will surely help its economy to navigate through troubled waters. Moreover, the country’s industrial profits climbed 4.8% to about $119.8 billion in the first two months of this year, according to the National Bureau of Statistics (NBS). Recovery in real estate industry was cited to be the reason behind this increase in industrial profits. NBS analyst He Ping added that the “positive trend was driven in part by quicker product sales of industrial firms and a narrowing in the decline of industrial producer prices.” Consumer sentiment too rose sharply in March. The Westpac MNI China Consumer Sentiment Indicator jumped 6.1% to 118.1 in March, its highest level since Sep. 2015. Banking on this optimism, it will be wise to invest in China focused mutual funds that have gained in the last one-month period. Further, these funds possess strong fundamentals, which will eventually help them continue gaining in the future as well. We have selected three such mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy), offer minimum initial investment within $5,000, carry a low expense ratio and have given positive returns in the last four weeks. Matthews China Investor seeks to achieve its investment objective by investing a large portion of its assets in the common and preferred stocks of companies located in China. MCHFX’s 4-week return is 1.9%. Annual expense ratio of 1.14% is lower than the category average of 1.76%. MCHFX has a Zacks Mutual Fund Rank #1. AllianzGI China Equity A seeks to achieve its objective by normally investing a major portion of its assets in equity securities of Chinese companies. ALQAX’s 4-week return is almost 7%. Annual expense ratio of 1.70% is lower than the category average of 1.76%. ALQAX has a Zacks Mutual Fund Rank #2. Invesco Greater China Y (MUTF: AMCYX ) invests the majority of its assets in equity or equity-related instruments issued by companies located in Greater China and in other instruments that have economic characteristics similar to such securities. AMCYX’s 4-week return is 7.1%. Annual expense ratio of 1.63% is lower than the category average of 1.76%. AMCYX has a Zacks Mutual Fund Rank #2. Original Post Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.