Tag Archives: nasdaq

Generic Drug Stocks Crash, As Endo Warns Of Price Erosion

Drugmaker Endo International ( ENDP ) plunged 39% Friday after it delivered a hefty guidance cut driven by weakness in its generics business, dragging nearly every other generic-drug stock down with it. Endo actually beat analysts’ consensus in Q1, but it cut its full-year earnings guidance by 23% — now $4.50 to $4.80 a share — and trimmed the revenue outlook by 11% to a range of $3.87 billion to $4.03 billion. In the company’s earnings release, CEO Rajiv De Silva blamed “new competitive entrants, including for Voltaren Gel; greater-than-expected price erosion across the Generics sector; and delays on regulatory actions related to certain Endo products.” IBD’s Take: How healthy are shares of Endo and Teva and how do they stack up vs. rivals? Find out at IBD Stock Checkup It was the second factor that rattled the rest of the generics industry. Teva Pharmaceutical Industries ( TEVA ) stock fell 6.8% to 50.22, and hit a 19-month low of 50.01. Allergan ( AGN ), already staggering from the cancellation of its buyout by Pfizer ( PFE ), hit a two-year low of 195.50 and ended the day at 201.63, down 4.1%, even though it’s selling its generics business to Teva. Perrigo ( PRGO ), which cut its own guidance last month, fell 4.8%, to 92.42. Smaller drugmaker Akorn ( AKRX ), down as much as 20%, ended the day off 7.9%, at 22. Akorn, which has fallen way behind on its accounting due to internal issues, late Friday finally set dates for its Q4 and Q1 earnings releases, for May 9 and May 17, respectively. Leerink analyst Joseph Schwartz wrote in a research note that Endo’s problems read through most directly to Teva, Akorn and Perrigo, and more moderately to Allergan. Essentially, whoever’s done the most price-hiking on products representing more than 5% of generic sales lately is in the most trouble. Referring to industrywide data from IMS, Schwartz wrote: “Based on our analysis, Akorn has taken 13 price increases matching the above criteria (44% of IMS generic sales), Perrigo eight (18% of generic IMS sales) and Endo took 17 (17% of generic IMS sales).” Teva, meanwhile, is due to report its own Q1 earnings and guidance on Monday morning, and Allergan is due before the open the following day. Endo itself got at least four downgrades from Wall Street analysts Friday, mostly to neutral but one to underweight. It ended the day at 16.17, a seven-year closing low.

Diversification: The Only Free Lunch On Wall Street

The value of long term asset diversification , sometimes known as “the only free lunch on Wall Street” is discussed in a recent MarketWatch article offering “Five Steps to Beating the Market.” “Stock investors typically regard ‘the market’ as essentially the Standard and Poor’s 500 Index of large U.S. growth stocks.” The article tracks and summarizes financial performance records since 1928 for large-cap blend the (S&P 500), large-cap value, small-cap blend, small-cap value stocks and a four-fund combination of these asset classes. In every summary, the four-fund combination produced a superior return to the S&P 500 alone. However, the price investors pay for higher performance is higher volatility. “For patient investors, those temporary losses are a relatively small price to pay for tripling the long-term return.” The following “five ways to beat the market” are drawn from the data the tables below. According to the article, investors should realize: Outcomes are not predictable at the outset. Longer time periods make more dependable returns. The correlation between levels of risk and expected return may be less clear with a diverse portfolio over long investment periods. “When you compare the worst 40-year periods, you find that two of three other asset classes (SCB and SCV) had not only higher average returns but also better worst-case returns.” A diversified portfolio has a higher probability of meeting or exceeding 10% long-term returns. “Two of the other three asset classes, plus the four fund combo, had no 40-year periods at all with returns less than 10%.” “Wall Street tries very hard to convince investors they can beat the market by hiring ‘the right manager’ to choose stocks,” but the article suggests that “beating the S&P 500 index doesn’t depend on a manager. It’s the asset classes that do that. Click to enlarge Click to enlarge

Will Volatility ETFs Rule In May?

The start of May has been tumultuous for the global stock market with volatility levels flaring up once again. The sluggish manufacturing numbers from China and U.S., a bout of softer-than-expected economic readings out of Europe and a weaker-than-expected April ADP jobs report in the U.S. have data cast a pall over the market all over again (read: Manufacturing Churns Out Slow Growth in US–ETFs in Focus ). This is especially true as the major U.S. benchmarks nosedived in last two days (as of May 4, 2016). The S&P 500 has reached the lowest level since April 11 . In fact, the ongoing earnings recession, tepid economic readings along with global growth worries have rattled the faith of investors. They have taken somber economic growth on the chin for long and sent the S&P 500 rallying as much as 15% from a February low. However, investors should note that signs of stability in the oil patch have done a lot to cool jittery investors’ nerves in this timeframe (read: MLP ETFs–Time to Invest on Oil Rebound or Too Risky? ). Now with growth worries back on the table, volatility levels have heightened and exchange-traded products designed to track the market volatility have received a shot in the arm. Volatility level is best represented by the CBOE Volatility Index (VIX). This fear gauge measures investors’ perception of the market’s risk and tends to rise during a downtrend or when investor panic starts to set in. As U.S. equities faltered, the volatility index climbed 9.3% in the past two trading days (as of May 4, 2016), suggesting that risks are rising and investors could definitely benefit from this trend. There are several ETF/ETN options available in the market that can provide some exposure to volatility. These products have proven themselves as short-time winners in chaotic times. Below we have highlighted short-term volatility products that will likely spring higher as long as growth issues continue to unsettle the global markets. As a caveat, investors should note that these products are meant for short-term trading: Regular Volatility ETFs A popular ETN option providing exposure to volatility, the iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA: VXX ) . The ETN focuses on the S&P 500 VIX Short-Term Futures Index Total Return. The index gives exposure to a daily rolling long position in the first and second month VIX futures contracts and replicates ‘ market participants’ views of the future direction of the VIX index at the time of expiration of the VIX futures contracts comprising the Index’. There are other products like the ProShares VIX Short-Term Futures ETF (NYSEARCA: VIXY ) and the VelocityShares Daily Long VIX Short-Term ETN (NASDAQ: VIIX ) . Leveraged Volatility ETFs Investors seeking to earn exorbitant gains in a very short time frame could tap leveraged volatility ETFs. Currently, there are two options available in this category – the ProShares Ultra VIX Short-Term Futures ETF (NYSEARCA: UVXY ) and the VelocityShares Daily 2x VIX Short Term ETN (NASDAQ: TVIX ) . Both products track the S&P 500 VIX Short-Term Futures Index. Link to the original post on Zacks.com