After hitting a one-year high of $59.17 in January, the stock hit a one-year low of $46.19 in April. NVS opened this morning at $50.96. So far today the stock has hit a low of $50.74 and a high of $51.10. As of 12:10, NVS is trading at $50.95, up 0.82 (1.6%). The chart for NVS looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $45 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in just two months as long as NVS is above $45 at July expiration. Novartis would have to fall by more than 11% before we would start to lose money. Learn more about this type of trade here.
NVS hasn't been below $46 at all in the past year and has shown support around $50 recently. This trade could be risky if one of the company's drugs gets into trouble with the FDA, but even if that happens, this position could be protected by the support the stock might find around $46, where it bottomed out about a month ago.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in NVS.
MOST NOTEWORTHY: Lincoln Educational, Sonus Networks and Novartis were today's noteworthy upgrades:
Lehman upgraded Lincoln Educational (NASDAQ: LINC) to Overweight from Equal Weight based on improving student enrollment growth and valuation.
Merriman upgraded Sonus Networks (NASDAQ: SONS) to Buy from Neutral on the company's strong AT&T (NYSE: T) outlook and near-term upside potential from Japan. They believe shares can trade towards the $5-$6 range.
Bernstein raised Novartis (NYSE: NVS) to Outperform from Market Perform as they believe the company's diversification position it well to withstand future generic expiries.
OTHER UPGRADES:
Goldman Sachs added Burger King (NYSE: BKC) to its Conviction Buy List.
Credit Suisse upgraded Imperial Tobacco (NYSE: ITY) to Outperform from Neutral.
This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and check out other Battle of the Brands posts.
Tylenol is probably the most recognizable brand name for the pain reliever acetaminophen. In addition to being a pain reliever, Tylenol also reduces fevers. It was created in 1955 as Tylenol Elixir for children, and was the first aspirin-free pain reliever. It was initially available only by prescription, but became available without a prescription in 1960.
The product is made and marketed by McNeil Consumer Healthcare, a brand owned by Johnson & Johnson (NYSE: JNJ). Tylenol falls within the Consumer segment of J&J, which had sales of $14.5 billion in 2007. Over-the-counter pharmaceuticals represented $5.1 billion in sales, or 35% of the segment's sales.
Excedrin is a pain reliever that combines acetaminophen, aspirin, and caffeine. (Caffeine is known to enhance the effectiveness of aspirin and acetaminophen.) It's a product of Novartis (NYSE: NVS), a Switzerland-based company that bought the Bristol-Myers Squibb (NYSE: BMY) consumer medicine business in 2005. Novartis produces a variety of consumer health care products, with 2007 revenue of $39.8 billion.
MOST NOTEWORTHY: Google, Ross Stores and Novartis were today's noteworthy upgrades:
Jefferies upgraded Google (NASDAQ: GOOG) to Buy from Hold to reflect the company's "impressive" improvements in monetization in Q1, no signs of weakness from the economic downturn and upside potential from display, video and mobile.
Lehman upgraded Ross Stores (NASDAQ: ROST) to Overweight from Equal Weight and believes the company's 2008 guidance of 8-9% sales growth and up to 20% bps in margin expansion will prove conservative.
Morgan Stanley upped Novartis (NYSE: NVS) to Overweight from Underweight on valuation and expectations for positive news flow from the company's vaccine division.
OTHER UPGRADES:
JP Morgan upgraded Bladex to Neutral from Underweight.
William Blair raised Watsco (NYSE: WSO) to Outperform from Market Perform.
SunTrust (NYSE: STI) was upgraded at Baird to Neutral from Underperform.
MOST NOTEWORTHY: Apple, Novartis and Infineon were today's noteworthy downgrades:
Morgan Keegan downgraded Apple (NASDAQ: AAPL) to Underperform from Market Perform citing increased evidence of broad-based weakness in consumer technology spending in the U.S. and Europe. Additionally, the firm expects challenges in the company's education vertical due to state and local budget issues, which could lead to decelerating growth over the next 2-3 quarters.
Bear Stearns downgraded Novartis(NYSE: NVS) to Peer Perform from Outperform following the acquisition of Alcon (NYSE: ACL), as they find the deal expensive.
Credit Suisse cut Infineon (NYSE: IFX) to Neutral from Outperform to reflect weakness in the U.S. dollar.
OTHER DOWNGRADES:
Goldman downgraded Wells Fargo (NYSE: WFC) and Zions Bancorp (ZION) to Neutral from Buy.
Keefe Bruyette cut Washington Mutual (NYSE: WM) to Underperform from Market Perform.
Baird downgraded Flowserve (NYSE: FLS) to Neutral from Outperform.
MOST NOTEWORTHY: The Brokers and Asset Managers sector, Pacific Sunwear and Metabasis Therapeutics were today's noteworthy upgrades:
Goldman upgraded the Brokers and Asset Management sector to Attractive from Neutral as they believe an inflection point has been reached for stocks with minimal credit exposure, or where exposure is marked to market. Goldman expects the problem to shift to regional banks and specialty finance from brokers. As such, Goldman upgraded American Express (NYSE: AXP), Metlife (NYSE: MET), Bank of New York Mellon (NYSE: BK), Franklin Resources (NYSE: BEN), Janus Capital (NYSE: JNS) and NYSE Euronext (NYSE: NYX) to Buy from Neutral.
Wachovia upgraded Pacific Sunwear (NASDAQ: PSUN) to Outperform from Market Perform based on valuation, merchandising improvements, operating efficiencies, favorable product mix, and reductions in underperforming categories.
Rodman & Renshaw raised Metabasis (NASDAQ: MBRX) to Outperform from Market Perform on valuation given the potential for MB07803.
OTHER UPGRADES:
HSBC raised Novartis (NYSE: NVS) to Neutral from Underweight.
UBS (NYSE: UBS) was upgraded at Morgan Stanley to Equal Weight from Underweight.
Nike (NYSE: NKE) unveiled its Olympics 2008 line Monday, its largest effort for the games ever. Nike actually created products in every sport at the games despite not being an official sponsor of the games like its rival Adidas. As for the U.S. team, it will be attired in Polo Ralph Lauren (NYSE: RL) garb.
If Apple Inc. (NASDAQ: AAPL) was upgraded Monday, today it finds itself on the flip side with a downgrade from Morgan Keegan from Market Perform to Underperform. Ummmm, contrarian is one thing, but I'm not so sure about that one. AAPL shares are down nearly 1.5% in premarket trading.
Meanwhile, according to MarketWatch, Goldman Sachs has upgraded some brokers and asset managers, but is remaining cautious on regional banks, mortgage and specialty finance and REITs. American Express (NYSE: AXP), Metlife (NYSE: MET), Bank of New York Mellon (NYSE: BK), NYSE Euronext (NYSE: NYX) and several others all were upgraded to Buy. Wells Fargo (NYSE: WFC) and several others were cut to neutral.
Traders came in this morning wanting to carry on from last week's stability on word that Washington Mutual, Inc. (NYSE: WM) was perhaps going to get a private equity bailout. At least a lifeline was the hope. But throughout the day shares slid from a 100 point gain to close mostly flat on the day as the market decided it had better get ready to go into earnings season yet again for Q1 2008 earnings reports from major companies. Below are the unofficial closes for US index levels:
MOST NOTEWORTHY: Seagate, Nortel Networks and Ann Taylor were today's noteworthy downgrades:
Thomas Weisel downgraded Seagate (NYSE: STX) to Market Weight from Overweight as they believe the company's growth will be more muted given high existing market share and overall industry growth.
Baird downgraded Nortel (NYSE: NT) to Neutral from Outperform citing checks that indicate deteriorating US Enterprise sales in the last few weeks of Q1. The firm now expects companies to guide flat QoQ instead of up and to make cautious 2H08 comments.
Ann Taylor (NYSE: ANN) was cut to Neutral from Buy at Piper to reflect concerns over the LOFT division as well as consumer spending.
OTHER DOWNGRADES:
Citigroup lowered TJX Cos (NYSE: TJX) to Hold from Buy.
WestLB downgraded to Hold from Add Novartis (NYSE: NVS).
Beware These 'Toxic' Stocks Certain shares may appear enticing now but they could poison your portfolio later. On the list: Valero, Williams-Sonoma, and Winnebago. Beware These 'Toxic' Stocks - BusinessWeek
Just announced this morning, global drug manufacturer Novartis (NYSE: NVS) is offering to buy a minority stake in the world's largest eye-care firm, Alcon (NYSE: ACL), by buying the stake from food conglomerate Nestle (OTC: NSRGY).
Essentially, the deal is to happen in two parts. The first stage appears to be a purchase of a 25% stake in Alcon for around $11 billion. This purchase comes with an option to purchase an additional 52% stake for about $28 billion.
Novartis will pay $143.18 a share for the purchase of the 25% stake. The option to purchase the 52% stake will come at a fixed share price of $181 and can come between 2010 and 2011.
From a statement on Nestle's website, the food maker plans to use the proceeds to reduce debt and the cash will also "support opportunities for profitable growth in line with the group's nutrition, health and wellness orientation.''
Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.
Stock futures were higher Monday morning as reports of a cash injection into WaMu as well as a big pharma deal hit the news. Also, Monday marks the beginning of earnings season as the first of the Dow companies, Alcoa reports after the close. Investors will be interested to see how corporate profits have fared in the first quarter of 2008 while many economists say the U.S. may have entered a recession during that time.
On Friday, U.S. stocks closed mostly higher despite a dismal March jobs report that showed payroll have declined for the third month in a row while unemployment jumped. Still, while the Dow industrials finished 16 points or 0.13% lower, it registered a weekly gain of 3.2%. The S&P 500 rose 1 point, or 0.08%, Friday for a 4.2% weekly increase, and the Nasdaq Composite added 7 points, or 0.32%, Friday, rising 4.9% for the week.
Without much economic news today, investors will focus on corporate news:
If last week it was UBS and Lehman Brothers that announced equity deals and helped boost sentiment on Wall Street, this week it is Washington Mutual (NYSE: WM), which according to The Wall Street Journal, is close to a deal to get a $5 billion investment from private equity firm TPG and other investors. As of 6:58 a.m., WM shares are up over 15% in premarket trading.
After hitting a one-year high of $59.17 in January, the stock hit a one-year low of $46.64 last week. NVS opened this morning at $50.21. So far today the stock has hit a low of $49.70 and a high of $50.44. As of 11:55, NVS is trading at $50.19, up $1.19 (2.4%). The chart for NVS looks bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a May bull-put credit spread below the $45 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.4% return in just 2 months as long as NVS is above $45 at May expiration. Novartis would have to fall by more than 10% before we would start to lose money.
According to Reuters, big pharma concern Pfizer Inc. (NYSE: PFE) is planning ahead for growth. The company has been plagued by generic competition and a falling stock price, so management knows that it's got to tell investors something good so that they will realize that the drug maker is still in the game.
Pfizer wants to use the theme of international growth to boost its potential shareholder value. The company is looking at Asia and the emerging markets as catalysts. Can't blame Pfizer for that; not only is that theme not played out yet, but with the weak dollar, shareholders should welcome any aggressive stance in this regard (so long as the company can execute properly). Then there's the pipeline, which Pfizer is aiming to expand, hoping to get as many late-stage trials going as it can.
Shareholders will have to wait and see how Pfizer's rhetoric plays out, but you can't dismiss the stock as an interesting long-term idea. By now, I don't need to tell you that pharmaceuticals and providers of healthcare products will always be in need; in fact, stocks like Johnson & Johnson (NYSE: JNJ), Merck & Co., Inc. (NYSE: MRK), and Novartis AG (ADR) (NYSE: NVS) are all interesting for this very reason. I happen to be prone to Johnson & Johnson myself, but the thing I like about Pfizer is its juicy yield, which sits well above 5% right now. Also, the stock is near its lows, and it is in a narrow 52-week range. I don't necessarily expect it to rocket higher tomorrow, but if you are looking for a drug company to add to your portfolio, definitely check this one out as a potential value, and keep yourself informed about Pfizer's plans for the emerging markets.
MOST NOTEWORTHY: Novartis, Waste Systems, AirMedia Group, and PAETEC Holding were today's noteworthy initiations:
Novartis (NYSE: NVS) was initated with a Neutral at Cowen, which cited the company's upcoming patent expirations.
Gabelli initiated Waste Systems (NASDAQ: WSII) with a Buy, as it believes consolidated operations in Florida, increased waste internalization, and continued price increases, should lead to expanding EBIT margins.
Oppenheimer initiated AirMedia Group (NASDAQ: AMCN) with an Outperform, as it believes that the Beijing Olympics will help the company acheive better than expected earnings.
Deutsche Bank initiated PAETEC Holding (NASDAQ: PAET) with a Buy, as the firm believes PATEC is well-positioned to benefit from improving industry conditions.
OTHER INITIATIONS:
Wachovia started Seaspan (NYSE: SSW) with a Market Perform.
Needham initiated Memsic (NASDAQ: MEMS) with a Buy.
Oppenheimer started Intellon (NASDAQ: ITLN) with an Outperform.
Morgan Stanley initiated Dice Holdings (NYSE: DHX) with an Equal Weight.
Novartis (NYSE: NVS) shares are trading higher today after the company announced that its high blood pressure drug Tecturna HCT works twice as well as the previous treatment. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on NVS..gif){kind=logo}
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Stock futures were higher Monday morning as reports of a cash injection into WaMu as well as a big pharma deal hit the news. Also, Monday marks the beginning of earnings season as the first of the Dow companies, Alcoa reports after the close. Investors will be interested to see how corporate profits have fared in the first quarter of 2008 while many economists say the U.S. may have entered a recession during that time..gif){kind=logo}
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