Allergan PLC in Buyout Talks with Pfizer Inc.

by Crista Huff

President, Goodfellow LLC

Chief Analyst, Smart Investing in Turbulent Times

 

ALLERGAN PLC: HOLD

(AGN, $311.22, up $24.02 midday)

Allergan PLC is in talks for possible purchase by Pfizer Inc. (PFE). In the event of a merger, Allergan intends to follow through with plans to sell its generic business to Teva Pharmaceutical Industries (TEVA).

Standard & Poor’s says, “the deal would be structured as a tax inversion, allowing PFE to reincorporate in Dublin and AGN’s size and product portfolio would enable PFE to scale up ahead of a potential split of the company”.

If the talks don’t lead to a buyout offer, AGN will fall down to $285-$290; not because AGN is an unattractive investment, but simply because stocks that go up quickly will invariably have a pullback. That’s a normal chart pattern.

AGN is up 14.7% since I told investors to hold their shares on October 15th. Within those comments, I emphasized that earnings estimates for AGN would be changing frequently in the coming months. Surprisingly, it has already happened. Within the last two weeks, analysts’ expected 2015 earnings per share (EPS) growth rate has come down dramatically, from 27.8% to 8.1%; and the 2016 EPS growth rate is expected to also be quite slow, at 6.9%.

AGN’s 2016 price/earnings ratio (PE) is very high in comparison to earnings growth, at 19.3.

This is important: AGN is an overvalued stock. Other than the current possibility of a buyout offer, there is no valid reason to expect the stock price to continue to rise until at least 2017. Therefore, if you own AGN, use stop-loss orders to protect your principal, while waiting to see if a buyout offer materializes. If those instructions are not clear, or you think you have input that contradicts my opinion, please contact me. I am certain that I can clear up any misconceptions regarding an investor’s hopes that AGN shares can continue rising in the medium-term, without a pending buyout offer.

Goodfellow LLC Rating: Hold, Volatile, Public.  (10/29/15)

 

Addendum: Regarding Pfizer, the stock price has just retraced its summertime highs. PFE is a relatively attractive growth & income stock, which I would consider buying if (1) it were not involved in M&A activity, and (2) the price was trading below $34. When a company is involved in an expensive purchase transaction, its stock tends to stagnate for a long time. Therefore, I would not buy PFE right now. If no M&A deal materializes, feel free to ask me to write about PFE as a potential growth & income investment.

Chart courtesy of StockCharts.com.

* * * * *

 

Goodfellow LLC is a subscription-based stock market website. Stock portfolio investors pay an annual fee to read my articles, which help them profitably navigate the U.S. stock markets, with the goal of outperforming the U.S. stock market indices.

I use a combination of strict fundamental and technical criteria to choose the stocks that receive buy ratings from Goodfellow LLC. Each facet of my investment criteria serves to lower the risk associated with stock investing. My investment strategy works — year in and year out.

 

Eight of the ten 2012-2014 Goodfellow LLC model portfolios

outperformed the market averages by margins of 50-100% and more!

 

Subscribe now, and begin improving your investment portfolio returns today!

Send questions and comments to research@goodfellowllc.com.

Happy investing!

 

Crista Huff

President

Goodfellow LLC

Chief Analyst

Smart Investing in Turbulent Times

 

* * * * *
Investment Disclaimer

Release of Liability: Through use of this website viewing or using you agree to hold www.GoodfellowLLC.com and its employees harmless and to completely release www.GoodfellowLLC.com and its employees from any and all liability due to any and all loss (monetary or otherwise), damage (monetary or otherwise), or injury (monetary or otherwise) that you may incur.

Goodfellow LLC and its employees are not paid by third parties to promote nor disparage any investment. Recommendations are based on hypothetical situations of what we would do, not advice on what you should do.

Neither Goodfellow LLC nor its employees are licensed investment advisors, tax advisors, nor attorneys. Consult with a licensed investment advisor and a tax advisor to determine the suitability of any investment.

The information provided herein is obtained from sources believed to be reliable but is not guaranteed as to accuracy or completeness. When information is provided herein from third parties — such as financial news outlets, financial websites, investment firms, or any other source of financial information – the reliability or completeness of such financial information cannot be guaranteed.

The information contained on this website is provided for informational purposes only and contains no investment advice or recommendations to buy or sell any specific securities. This is not an offer or solicitation for any particular trading strategy, or confirmation of any transaction. Statements made on the website are based on the authors’ opinions and based on information available at the time this page was published. The creators are not liable for any errors, omissions or misstatements. Any performance data quoted represents past performance and past performance is not a guarantee of future results. Investments always have a degree of risk, including the potential risk of the loss of the investor’s entire principal. There is no guarantee against any loss.