Company: Covidien PLC
Ticker Symbol: COV
Action: Buy up to $75
Capitalizing on the Growing Need for Health Care Around the Globe!
The All-weather Portfolio (AWP) strategy was designed to help investors get more consistent returns. I look for high quality, low volatility investments in an effort to see fewer ups and downs than the overall market. One of the ways I accomplish this is through combining various asset classes like dividend paying stocks, currencies, commodities, precious metals, bonds, and other hedging vehicles. For the past 5 years, the strategy has worked well. Since 2009 the strategy is up over 134% (as of 3-28-13) that works out to 31.5% per year!
One of my favorite tasks is looking for defensive stocks that can weather the ups and downs that come our way. I especially like the health care sector because there is always a need for quality medicine and medical care no matter what the economy is doing.
• Aging populations in developed countries will need more health care.
• As emerging markets adopt modern medical practices, their consumption of health care will increase.
• Growing global utilization may benefit providers of low-cost, high-volume health care products that will be demanded in both developed and developing countries.
In the health care sector, one of my favorite selections is a company called Covidien PLC (NYSE: COV), which pays a 1.4% dividend. It is up nearly 50% since I bought it in December of 2011 and I believe its best days are still to come.
Covidien is engaged in the development, manufacture and sale of healthcare products for use in clinical and home settings. It operates its businesses through three segments: Medical Devices, Pharmaceuticals and Medical Supplies.
Here are a few reasons I love this stock:
1. Innovation: Covidien’s latest product launches have the potential to become strong contributors to its top line results. One area that is exciting is its wireless energy device, Sonicision that was launched in 2012. With Sonicision™, Covidien enhances its energy portfolio from electrosurgery to vessel sealing and now ultrasonic dissection. Benefits include:
• Faster dissection than the Harmonic ACE™
• Thermal spread, vessel burst pressure, hemostasis, seal time and blade temperature comparable to the Harmonic ACE™
• Up to five times less plume than Harmonic ACE™
• Finalist for a 2013 Medical Design Excellence Award
2. Strong growth: Covidien’s vascular business is enjoying robust growth over the past few years. Its stellar product portfolio in neurovascular, a small, has aided this yet rapidly growing market.
3. Promising Future: Covidien is launching a study to determine the clinical efficacy of bariatric procedures in treating Type 2 diabetes in patients with a body mass index less than 35. This has a lot of promise for the future. If these studies produce positive results, the potential patient pool could increase by about 5 million people.
4. Exciting opportunities: Emerging markets offer sizable and rather underpenetrated marketplace for the company. Covidien is launching a number of products designed specifically for emerging markets, which should give the company an opportunity to position itself as a top medical instruments player in these attractive markets.
Action to Take: This is a good buy up to $75 a share. My 12-18 month price target is $100 representing a 50% rise from its current price.
Company: Trius Therapeutics
Ticker Symbol: TSRX
Action: Buy up to $7.50
3/23/13 Analysis… I am allocating 10% to Trius Therapeutics, Inc. (TSRX) with a buy up to $7.50. Trius Therapeutics, Inc., a biopharmaceutical company, focuses on the discovery, development, and commercialization of antibiotics for serious infections. It is highly likely that in the tail end of March, or early days of April, that an uptick opportunity will surface with Trius Therapeutics in the form of the release of topline data on the second of two Phase III trials for the firm’s tedizolid drug. Results for tedizolid are expected to be positive, as were the first trial. My stop loss will be 20% below entry. This is a HIGH RISK trade.
Company: Hormel Foods
Ticker Symbol: HRL
Action: Buy up to $42
Making money in the stock market isn’t hard – there are hundreds of successful investing strategies out there. But ask any investor how to keep their investments consistently safe and profitable, and it’s a different game. I like to call them “Forever” stocks — those you can pretty much buy, forget about and hold forever… These stocks weather the storms that come and go through bull and bear markets.
To achieve good returns and consistency, I look for highquality investments with low volatility. In today’s market, my favorite investments are stocks that steadily pay dividends. When you buy a dividend-paying stock, you should be concerned about a company’s expected growth and the stability of its dividend payments. I typically look for stocks that have a strong history of consistently raising their dividends with above-average yields.
This requires looking at a company’s earnings trends. As a company becomes more profitable, it increases the likelihood of its continually growing dividends. In addition, the company should be safe. That means it should provide a recession-proof product or service. For example, consumer staples companies such as Kimberly-Clark Corp. (NYSE: KMB) or Colgate-Palmolive (NYSE: CL) are always safer picks. But one of my favorite sectors to find safe and steady dividend payers is the food industry.
Think about it,people need to eat no matter how the economy is doing. And one of the most sought-after foods is meat. According to FAO projections, meat consumption has been steadily increasing from 1960 to present. Meat consumption in developing countries has been continuously increasing from a modest average annual per capita consumption of 10 kg in the 1960s to 26 kg in 2000 and will reach 37 kg around the year 2030. Emerging countries like China are having trouble keeping up with the demand for meat as it is putting a strain on its land and water resources. As a result of water shortages, China has been forced to import 70 percent of its soybeans and increasing amounts of its corn from the U.S., Brazil and Argentina to feed its cows and pigs.
Of the meat companies, my favorite is a classic dividend stock — Hormel Foods (NYSE: HRL). Investors who purchased $100,000 worth of the stock on Jan. 2, 1990, would have gained $2,910 annually with a yield of about 3%. This might have not mean much in 1990, but fast forward to today and you will be amazed at the compounding effect on the gains. Take a look at the table below…
|Hormel Foods (NYSE: HRL):
|@ 8% Interest, maturing 2013:
|* 20-year T-Bond @ 2.%
As you can see, the stock grew the investors’ income and substantially increased their capital as well. Bond investors, however, enjoyed a steady 8% income for 23 years, but were in shell shock when they had to renew their investment at a measly 2.7% after 20 years. Hormel is a leader in its industry because it trumps the competition by selling value-added meat products, as opposed to distributing solely raw meats and other commodities. Hormel’s notable brands include Spam, Jennie-O, Country Crock, Lloyd’s and Chi-Chi’s. Take a look at its recent success:
Here are a few reasons I like Hormel:
It focuses primarily on convenient products, which are in high demand today with so many people on the run. This should be a growth opportunity for Hormel as more people are eating meals at home and looking for time-saving meal options.
2. Successful acquisition
In January, Hormel purchased the 81-year-old peanut butter maker from Unilever for about $700 million.Skippy peanut butter brand, which is a leader in China with $30 million in annual sales. This should allow Hormel to further expand its brand across the globe, as Skippy is sold in more than 30 countries. The winning combination of its superior brand recognition along with its convenient value-added products should allow Hormel to introduce new products and to charge higher prices for its products than its meat-processing peers.
3. Lean supply chain
Hormel has a strong, vertical-integrated supply chain that takes advantage of economies of scale. This keeps new competitors from eating into Hormel’s current market share. For example, Hormel raises about 70% of the turkeys needed to meet sales volume. This lowers its costs and allows it to have a competitive advantage.
4. Strong financials
Hormel’s financial health is very impressive. At the end of 2012, its current and quick ratios were about 3 and 1.7, respectively . The company’s debt-to-capital ratio was less than 0.1 at the end of 2012, in line with the company’s historical average. With EBITDA covering interest expense almost 70 times at the end of 2012, it looks like it is in great shape for the future. Its forward price-to-earnings (P/E) is low at roughly 17 compared to the industry average of 27. It also has an enterprise value/EBITDA of 9, and a free cash flow yield of a little less than 6%. Hormel should be able to maintain gross margins in line with its historical three-year average of about 17% during the next five years. In addition, Hormel’s operating margins should continue to average around 10% during the next few years as a result of its recent success in generating cost savings throughout the supply chain.
Risks to Consider: As the food industry becomes more competitive, Hormel has been forced to allocate a great deal of spending on product innovation and marketing support, which could lessen profitability and squeeze margins in the future. Also, surging commodity prices for soybean and corn could dramatically increase Hormel’s feed costs, which would pressure margins. In this slow-growth economy, retailers have more negotiating power, making it more difficult for Hormel to raise prices.
Action to Take –> Hormel Foods is a good buy up to $42 a share. With a current dividend of 1.6%, investors should be able to count on consistent income as it has raised its dividend each year since 1967. The company is still well positioned to continue its impressive 15% annualized growth rate.
* Another Financial Collapse Brewing?
* High Unemployment?
* The Impact of Omamacare?
* European Debt Crisis?
* Slowdown in China?
* Another Global Recession?
How can you develop a game plan to thrive?
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Company: HCP Inc.
Ticker Symbol: HCP
Action: Buy up to $51
Here is how you can combine my two favorite sectors for 2013 – health care and REITS (real estate investment trusts):
Some investors like the diversification and potential of REITS. Health Care investment trusts are an niche within the REIT sector. Health care REITs allow individuals a chance to own shares of major-league commercial properties like malls and office buildings through pooled investment.
A health care REIT invests in properties like healthcare facilities,
medical office buildings, and retirement and nursing homes. With a health
care REIT, you can invest in prime commercial real estate that is already
professionally managed. So you can be a real estate investor without
having to landlord, flip or exchange properties, most of the gain with a
lot less pain.
With the American population aging, demand is increasing for healthcare
and long term care facilities to be built and leased. This is why many
investors feel health care REITs will perform well regardless
of what Wall Street does. Additionally, hospitals and healthcare providers
constantly need capital. By selling a facility to a REIT, they get it.
They can also get more debt off their balance sheets, and
that can help their ratings improve. Investors profit from health care
REITs in the same way they do with all REITs: through dividends and the
long-term appreciation of shares.
My favorite health care REIT right now is HCP Inc (NYSE: HCP). Health Care
Property Investors, Inc. is a real estate investment trust. The company
invests in health care related real estate located throughout the United
States, including long-term care facilities, congregate care and assisted
living facilities, acute care and rehabilitation hospitals, medical office
buildings, physician group practice clinics and psychiatric facilities.
Buy HCP, Inc. (NYSE: HCP) up to $51 per share. Price target is
a 20-30% gain over the next 12-18 months. It is a self-administered, real
estate investment trust, which acquires, develops, leases, manages and
disposes of healthcare real estate and provides financing to healthcare
providers. This pays a 4.13% dividend and it has raised dividends every
year since 1986.