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Date:_____________
Analyst Name:___________________
CIF Stock Recommendation Report (Spring 2015)
Company Name and Ticker:___ACT_____________
Section (A) Investment Summary
Recommendation Buy: Yes No Target Price: $328.00
Stop-‐Loss Price: $285.00
Sector: Healthcare Industry: Drug Manufacturer-‐ Specialty and Generic
Market Cap (in Billions): $79.2 Bil
# of Shrs. O/S (in Millions): 266.25
Current Price: $296.23 52 WK Hi: $297.48
52 WK Low: $184.94 EBO Valuation: $781.16 (5-‐yr)
Morningstar (MS) Fair Value Est.: $330.00
MS FV Uncertainty: Low MS Consider Buying: $264.00
MS Consider Selling: $412.50
EPS (TTM): $-‐5.22 EPS (FY1): $17.58 EPS (FY2): $21.06 MS Star Rating: 4 star
Next Fiscal Yr. End ”Year”: 2015 “Month”: March
Last Fiscal Qtr. End: 12/14 Less Than 8 WK: Y N
If Less Than 8 WK, next Earnings Ann. Date: N/A
Analyst Consensus Recommendation: Buy
Forward P/E: 14.40 Mean LT Growth: 20.00% PEG: 0.7 Beta: 0.31
% Inst. Ownership: 90.60%
Inst. Ownership-‐ Net Buy: Y N
Short Interest Ratio: 9.33 Short as % of Float: 12.80%
Ratio Analysis Company Industry Sector
P/E (TTM) N/A (Forward PE: 25.50%)
38.99 40.21
P/S (TTM) 5.92 5.14 41.04
P/B (MRQ) 2.73 6.33 6.21
P/CF (TTM) 64.53 30.04 337.99
Dividend Yield 0.0% 1.36% 1.32%
Total Debt/Equity (MRQ) 54.86 9.32 11.24
Net Profit Margin (TTM) -‐12.48 11.31 7.54
ROA (TTM) -‐4.33 12.70 8.11
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Investment Thesis Pros: Activist has been consciously trying to diversify their products by acquiring smaller companies that possess strong pipelines. Because they are buying out Allegran they will have a strong hold on the generic drug market which faced limited competition. Activis has a broadly diversified portfolio of drugs with only three of their products exceeding in 1 billion in revenue, Botox, Namenda and Restasis. Botox their top seller which produces 11% of the overall revenue holds a global market share of nearly 76%. Activis is regarded by MorningStar to have a wide economic moat accounting this to the company’s diversified portfolio which is able to keep their competitors at bay. Cons: Future growth is reliant on some of the products in development that has experienced some snags in clinical trials. Activists’ specialty drug franchises face high levels of generic competition over the next few years, which will cut their pricing, power.
Summary
Company Profile: Actavis PLC primarily develops and manufacturers generic and branded pharmaceuticals, along with business in many other segments. Their recent acquisitions have increased their revenue dramatically and are forecasted to continue to increase even more after their acquisition of the Allergan, the main supplier of Botox. Fundamental Valuation: Using the EBO Valuation, the results of the implied price are $781.16/share.
Relative Valuation: We compared Mylan, Novartis AG, Teva Pharmaceutical Industries Limited and Gilead Sciences Inc. The stock seems to be fairly valued when taking into conclusion recent acquisitions.
Revenue and Earnings Estimates: The revenue and earnings estimates were all positive as they suggest positive growth over the next year. As of the last earnings report surprises beat analyst expectations.
Analyst Recommendations: All the analyst covering this stock mostly want to buy or outperform with a few holds.
Institutional Ownership: Actavis has a large institutional holding of just over 98%, which is high compared to the other companies in the industry
Short Interest: Short interest is high compared to its competitors, although the last report came before the earnings beat, which would most likely drive that number down.
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Section (B) Company Profile
(B-‐1) Profile Include in this section, at the minimum: Company Description; major business units and % breakdown of revenue/earnings; % breakdown of domestic and international business; business model; management strategy; competition and competitors of each major business unit; sensitivity to business cycle & macro environment; life cycle; significant merger/acquisition or major restructure in recent years; significant pending litigations, material patents or other intellectual properties-‐related issues; major risk factors; other company or industry-‐specific development or issues deemed material (e.g., labor disputes, trade tensions, regulatory or policy changes, technology & product innovations, natural disasters, etc.)
Actavis PLC (ACT) is a pharmaceutical company that is based out of Dublin, Ireland. They focus their business on developing, manufacturing and selling both generic and branded pharmaceutical drugs. Currently the third largest generic drug manufacturer in the world, the company has a broad portfolio of more than 200 drugs. They have 36 manufacturing facilities, and more than $13 billion in revenue from 2014. Their recent acquisitions of Warner Chilcott and Forest Labs have both increased and enhanced the company, and the acquisitions of Allergan in early 2015 will also boosts sales tremendously for Actativs.
Actavis is made up of many segments. 43.97% of total revenue comes from branded pharmaceutical products and 44.54% of total revenues come from generic pharmaceutical products. Anda Distribution makes up 11.49%, Actavis Pharma makes up 43.97%, Womens Health makes up 6.56%, Urology and Gastroenterology makes up 11.25%. Dermantology and Established Brands make up 5.2% of total revenue, Delzicol and Asacol HD make up 3.83%, Lo Loestrin Fe makes up 1.94%, Minastrin Fe makes up 1.47% and Estrace Cream makes up the final 1.81%.
The main competitors of Actavis are Mylan, Novatris AG, Teva Pharmaceutical Industries Limited and Gilead Sciences Inc. These companies all fall under the healthcare sector, but more specifically in the generic and branded pharmaceutical manufacturers. Although Actavis is facing current debt from the multiple acquisitions, the company’s revenue growth is higher than all of their competitors. Actavis business model is the acquisition of several companies to help increase the company’s branded portfolio and well as an increase in revenue. These current acquisitions have now positioned the company to be one of the largest pharmaceutical companies in the world, doing in business in more than 60 countries. They are committed to have a strong focus and determination on researching and developing new drugs but that are
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cost-‐effective. These goals for the company are meant to increase long-‐term growth and value for their shareholders.
(B-‐2) Revenue and Earnings History (Refer to the guidelines document for revenue and earnings data to be included)
* Units in Millions of US Dollars ** Units in US Dollars Fiscal 2013: Total Revenue: $8,677.60 EPS: $-‐5.426 Fiscal 2014: Total Revenue: $13,062.20 EPS: $-‐5.875
1) What are your observations on revenue? Was there a notable up-‐ or down-‐trend, year-‐
over-‐year? Was there seasonable pattern? Revenue has shown to be increasing in the years 2013 and 2014 by roughly $5 million. 2013 saw a consistent increase in overall revenue except for the slight drop between December 2013 and March 2014, however its revenue picked back up in the next quarter and continued to increase from there.
2) Likewise, what are your observations on earnings? Although 2013 and 2014 both came out with negative earnings does not mean that Actavis is not a profitable company. Having a negative EPS tells you how much the company is losing per share of an outstanding stock, and this is generally seen in companies that are developing new products such as Actavis. So the fact that both years ended with negative earnings per share are mainly due to the acquisitions Actavis has made in order to increase their company.
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(B-‐3) Most Recent Quarterly Earnings Release
1) When was the company’s most recent earning release? February 18, 2015
2) In that earnings report, was reported revenue a (1) beat, (2) match, or (3) miss from consensus estimate? Beat by 44%
3) Likewise, was reported earnings a (1) beat, (2) match, or (3) miss from consensus estimate? Beat by 23%
4) What did the management attribute the beat/miss to? Actavis management attributed to the beat with their acquisitions of companies such as Warner Chilcott PLC and Forest Laboratories, Inc., which helped them expand its branded pipeline.
5) Did the management provide guidance about their current quarter and their outlook for the year? What were the key points of the guidance? Actavis plans on acquiring Allergan in early 2015, however management has an outlook for $15 billion in revenue before the acquisition. They also expect Allergan’s products will produce about 60% of their revenue through branded pharmaceuticals such as Botox, which has already proved to make about $2 billion in sales a year alone.
6) How did the stock react to that earnings release? After the earning report on February 18th, the stock price dropped from $289.13 to $281.67 but jumped up $9 the following day and has continued to have a steady stock price around $295.00.
Section (C) Fundamental Valuation (EBO)
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Inputs (provide below input values used in your analysis)
EPS forecasts (FY1 & FY2): $17.58 and $21.06
Long-‐term growth rate: 20.00%
*** Indicate next to the number if you made an adjustment to the consensus LTG estimate. Justify at the bottom of this panel how you derive the adjusted value, if any *** Book value /share (along with book value and number of shares outstanding):
Book value: 28,331.10
# of shares outstanding: 265.90
Book value / share: 106.548
Dividend payout ratio: 4.58%
Next fiscal year end: 2015
Current fiscal month: March
Target ROE: 19.88%
*** Indicate next to the number if you made an adjustment to the target ROE estimate. Justify at the bottom of this panel how you derive the adjusted value, if any *** Discount rate 4.47%
Input for discount rate:
Risk-‐free rate: 2.66%
Beta: 0.71 *Calculated by taking average of Reuters, Morning ……………………………………………Star and Yahoo
Market risk premium: 5.84% *chose the low end of E(rm) of 8.50%
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Output
Above normal growth period chosen: 5 years
*** Justify at the bottom of this panel your choice of abnormal growth period ***
EBO valuation (Implied price from the spreadsheet): $781.16
1) Comment on the fundamental value obtained in relation to the stock’s current price and its 52-‐week price range. The fundamental value obtained was significantly higher than the 52-‐week price range, more than doubling the price.
2) What might be “soft spots” of the inputs? And why? Soft spots of the input could be due to the fact that many of the products that Actavis manufacturers have a patents that are soon to expire. Not only would this contribute to soft spots, but Actavis is continuing to acquire new pharmaceutical companies which is diversifying their drug portfolio and growing their company. We chose a growth period of 5 years because it is unsure on which companies other than Allergan that Actavis plans on acquiring in the next few years.
Sensitivity Analysis
1) Explain the input values used in sensitivity analysis. Compare the fundamental values obtained here in relation to the value from the base case When extending the growth period, the stock increased tremendously, it also increased by more than $100 when increasing the growth rate about 5%. However, when inputting a lower estimate growth rate the stock slightly decreased, which was the same result to increasing the discount rate. When using the sector average ROE of 19.07% versus Acatavis’ ROE of 19.88%, the stock price went up a little more than ten dollars.
EBO valuation would be (you can include more than one scenario in each of the following):
$970.83 if changing above normal growth period to 7 years.
$838.57 if changing growth rate from mean (consensus) to the highest estimate 25.20%
$758.95 if changing growth rate from mean (consensus) to the lowest estimate 17.88%
$709.15 if changing discount rate to 7.57%
$793.59 if changing target ROE to 19.07%
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Section (D) Relative Valuation
Copy/paste your completed relative valuation spreadsheet here
We chose Mylan, Novartis AG, Teva Pharmaceutical Industries Limited, and Gilead Sciences to compare to Actavis. All of these companies fall into the healthcare sector, but more specifically in the pharmaceutical and generic drugs industry.
Mylan: Pharmaceutical Company that works with both branded generic and specialty pharmaceuticals.
Novartis AG: Multinational group of companies that development and manufacture a range of products with a focus on pharmaceuticals.
Teva Pharmaceutical Industries Limited: Global pharmaceutical and drug company that produces mainly generic drugs.
Gilead Sciences: Research based Biopharmaceutical Company that develops and commercializes medicines.
Note: Your discussions in this section should address all of the following valuation metrics: forward P/E, PEG, P/B (MRQ), P/S (TTM), and P/CF (TTM). If you made a decision excluding a competitor from calculation of median of a particular valuation multiple, you must justify your decision (i.e., reasons why you feel strongly that particular valuation multiple from a particular competitor is not a good indicator).
1) Discuss various valuation multiples of your stock and its peers. Comment if any of these stocks have multiples far off from the others and explain whether it makes sense.
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Actavis has one of the best P/B of 2.73, which is not far off from its competitor TEVA with a P/B of 2.07. Actavis also shows have an average P/S of 5.92 which is similar to the other companies. We decided to exclude the ROE due to the fact that Actavis is in the process of acquiring new companies, causing minor debt, however the companies that they are acquiring are forecasted to increase the ROE tremendously. Actavis also hold ones of the highest Forward P/E ratios amongst its competitors. The P/CF of Actavis is notably higher than the other companies with a 64.53 and the PEG is the lowest of the group with 0.70.
2) Discuss the various implied prices of your stock derived from peers’ (“Comparables”) multiples. Compare these implied prices to current price and 52-‐week high and low. How different are the prices derived from the various valuation metrics? Note any valuation metrics that seem to yield outlier prices and explain whether it makes sense. Implied price we got from Mylan using the Forward P/E ratio was $258.42 which seemed to be the most comparable with Actavis with a Forward P/E ratio of $296.23, and this was similar to the mean of the 52 week high and low of $269.03. Teva had a much larger PEG of $4179.97 compared to its competitor’s mean of $1453.67, so we decided to opt out of this category due to the large margin amongst the competitors. Within each category, one company out of its competitors seemed to be significantly higher, yet no company was consistently higher than the rest.
3) Compare your findings with comments from analysts from Morningstar Direct and other online resources. Comments from analysts on MorningStar Direct showed that Actavis had one of the strongest P/S and P/B ratios compared to their peers as well as gave them a higher rating compared to their competitors. However the Nasdaq and other online resources say that Actavis is fairly valued, especially when taking into consideration their recent acquisitions.
Section (E) Revenue and Earnings Estimates
(E-‐1) Copy/Paste “Historical Surprises” Table from http://www.reuters.com/ , “Analysts” tab (include both revenue and earnings; make note that revenues might be in “millions”)
Review recent trends in company’s reported revenue and earnings, and discuss whether (1) the company has a pattern of “surprising” the market with numbers different from analysts’ estimates; (2) Were the surprises positive(actual greater than estimate) or negative (actual less than estimate)? (3) Were the surprises more notable for revenue or earnings? (4) Look up the stock chart to see how the stock price reacted to the “surprises.
NOTE: Reuters does not put the sign on the surprise. You need to put a “-‐” sign when it is a negative surprise.
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Activist has had some pattern of surprising analyst estimates but in a good way. Since the end of the quarter in 2013 they have beat the estimates for sales and earnings. On average since December 2013 ACT has beat the sales estimate by 3.326% and in earnings by 4.59% so they were more notable for earnings but not by much. The stock reacted well after the most recent surprise by increasing for two days when they released the earnings for Q4 on the 18th of February.
(E-‐2) Copy/paste “Consensus Estimates Analysis” Table from http://www.reuters.com/, “Analysts” tab (include both revenue and earnings)
Review the range and the consensus of analysts’ estimates. (1) Calculate the % difference of the “high” estimate from the consensus (mean); (2) Calculate the % (negative) difference of the “low” estimate from the consensus; (3) Are the divergent more notable for the current or out-‐ quarter, FY1 or FY2, revenue or earnings? (4) Note the number of analysts providing LT growth rate estimate. It that roughly the same as the number of analysts providing revenue and earnings estimates?
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Sales& DivergentQ1&High 4.0166%Q1&Low '5.4024% 9.42%Q2&High& 9.9676%Q2&low '20.9611% 30.93%
FY1&15&High 5.2261%FY1&15&Low '7.3535% 12.58%FY2&16&High& 6.3053% AverageFY2&16&Low '3.9678% 10.27% 15.80%EarningsQ1&High 8.8452%Q1&Low '4.6683% 13.51%Q2&High& 12.9717%Q2&low '12.0283% 25.00%
FY1&15&High 2.1615%FY1&15&Low '3.6405% 5.80%FY2&16&High& 9.7341% AverageFY2&16&Low '8.3571% 18.09% 15.60%
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In both sales and earnings the divergent was much more noticeable in the quarter out (June 15’). For FY1 and FY2 however in sales there was a greater divergent in FY1, then for earnings it switched and there was a greater spread between FY2. Overall the divergent was just slightly larger in sales at 15.8% compared to earnings 15.6%. For the long term growth it is interesting that there is only one analyst on Reuters compared to the 7-‐12 analyst commenting on sales and earnings.
(E-‐3) Copy/paste “Consensus Estimates Trend” Table from http://www.reuters.com/, “Analysts” tab (include both revenue and earnings)
Review recent trend of analysts’ consensus (mean) estimates on revenue and earnings. (1) Are the consensus estimates trending up, down, or stay the same? (2) Is the trend more notable for the near-‐ or out-‐ quarter, FY1 or FY2, revenue or earnings?
The consensus estimates are trending up across the board accept for Quarter 2 in earnings where we see a drop in $0.01. The trend is slightly more noticeable in both the quarters out and FY2. One thing worth noting on this chart is the jump sales estimates took from one month ago to one week ago, most likely due to the planned acquisition of Allergan. The upward trend
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is much more noticeable taking into account the large jump in sales estimates compared to earnings.
(E-‐4) Copy/paste the “Estimates Revisions Summary” Table from http://www.reuters.com/, “Analysts” tab (include both revenue and earnings)
Review the number of analysts revising up or down their estimates (both revenue and earnings) in the last and last four weeks. (1) Note whether there are more up or down revisions; (2) are the revisions predominantly one directional? (3) Any notable difference last week versus last four weeks, revenue versus earnings?
Across the board there are much more up revisions than down. In the past four weeks the only down revision in Revenue was reported for the quarter end March 15’. Similarly with earnings, Q1 and Q2 of 2015 were given one down revision but in the last week there have been no down revisions in Q1, Q2 and FY1 and FY2. There are no notable changes between the up and down revisions in the past month or week.
(E-‐5) “Consensus Earnings Revisions” from CNBC
Go to http://www.cnbc.com/, “news”, “earnings”, “calendar”, “consensus revisions”. Look for whether your stock had consensus earnings revision today. Copy/paste the information, if
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any, to the following table. Go back one day, copy/paste the information if there was consensus earnings revision. Repeat the process back one month. Add rows to the table if needed.
Revision Date
Revision Type
Revision Up/Down
$ Current
$ Previous
% Change
# of Analysts Reporting
Feb. 27 Down 10/1 4.05 4.07 -‐0.61 14 Feb. 25 Up 9/1 4.07 4.07 0.15 15 Feb. 23 Up 9/1 4.07 4.05 0.32 15 Feb. 19 Up 8/2 4.05 3.99 1.66 15 Feb. 18 Down 6/1 3.99 4.00 -‐0.18 11 Feb. 13 Up 6/1 4.00 3.97 0.63 10 Feb.10 Up 6/0 3.97 3.97 0.13 11 Feb. 9 Up 5/0 3.97 3.93 0.94 11 Feb 3 Up 3/0 3.93 3.90 0.67 11 1) Make note of the company’s (1) last earnings reporting date, and (2) next earnings
reporting date. There last earnings report was February 18, 2015 and the next is set for April 29, 2015.
2) Review revisions day by day, and comment on (1) whether they tend to be clustered, and (2) if clustered, were they near earnings reporting date?
They had a quite a few revisions over the past month although most of them were up revisions. There was a down revision on the day of the earnings report of 0.18% but the following day they were given an up, which changed 1.66% there largest revision over the month.
3) Were there any greater than 10% consensus revisions? What is the maximum % consensus revision?
There weren’t any consensus revisions greater than 10% and the largest was a 1.66% up revision on February 19th.
4) Observe stock price chart, how did the stock trade around dates of greater than 10% consensus revisions?
N/A 5) Other observations worth noting?
Nothing worth noting
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Section (F) Analysts’ Recommendations
(F-‐1) Reuters Most Recent Three Months Analysts Recommendations Copy/paste the “Analyst Recommendations and Revisions” Table from http://www.reuters.com/ , “Analysts” tab. NOTE: Make sure you copy the entire table including “Mean Rating” at the bottom of the table.
1) Over the past three months there has been no change to the analyst recommendations. Across financial websites like CNBC and Yahoo finance there is a consistency of many buys and outperforms and a few holds with zero underperform and sell recommendation. Due to the consistency across the market analysts are clearly still bullish on this company.
2) They only received buy, outperform and hold over the past three months. 3) There has been no notable change in opinion or divergence in recommendations. 4) The same is true across all media sources (CNBC, Yahoo Finance, MorningStar) on Actavis.
The only difference I can point out is that morning star does not give any hold recommendations just buy and outperform.
5) Nothing else worth noting.
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(F-‐2) Most Recent One Month Analysts Upgrades/Downgrades from CNBC
Go to http://www.cnbc.com/, “news”, “earnings”, “calendar”, “upgrades” and “downgrades”. Look for whether your stock was up-‐ or down-‐graded by one or more analysts today. Copy/paste the information, if any, to the following table. Go back one day, copy/paste the information if there was (were) upgrades or downgrades. Repeat the process back one month. Add rows to the table if needed. Revision Date
Current Recommendation
Previous Recommendation
Firm Last Revision
Most recent revision date
Earliest revision date in the last month
1) Make note of the company’s (1) last earnings reporting date, and (2) next earnings reporting date.
2) Add up the number of upgrades on weekly basis. Do the same for downgrades. Were there more up-‐ or down-‐grades? Were there any consistent trend you observe in the recent month? Were there any up-‐ or down-‐grades of more than “one grade”?
3) Were there clustering of up-‐ or down-‐grades? If so, were they clustered around earnings report date?
4) Observe stock price chart, how did the stock trade around dates of up-‐ or down-‐grades? 5) Other observations worth noting?
There hasn’t been any upgrades or downgrades to the company in the past month.
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Section (G) Institutional Ownership (Guidelines Have Been Updated)
Copy/paste the completed “CIF Institutional Ownership” spreadsheet here.
Combine information provided in all three sections to discuss:
1) Whether institutions, on net basis, have been increasing or decreasing ownership and whether the change can be considered as substantial
The 3-‐month net change was 127, which is a positive signal. Over the past three months Actavis has more increased positions than decreased positions.
2) Whether the stock has sizable institution interests/support Activis is almost exclusively institutional owned at 98.45%. This is a really high number, compared to its competitors. This
Section(1
Ownership(Activity #(of(Holders %(Beg.(Holders Shares %(Shares
Shares(Outstanding 279,538,907 100.00%
#(of(Holders;(Total(Shares(Held/%(Shares 1,078 108.02% 253,262,250 90.60%
#(New(Positions 149 14.93%
#(Closed(Positions 69 6.91%
#(Increased(Positions 528 52.91%
#(Decreased(Positions 401 40.18%
Beg.(Total(Inst.(Positions 998 100.00% 234,404,539 83.85%
#(Net(Buyers;(3(Mo.(Net(Chg 127 56.84% 18,857,711 6.75%
Section(2
Ownership(Information %(Outstanding
%(Institutional(Ownership 98.45%
Top(10(Institutions(%(Ownership 37.33%
Mutual(Fund(%(Ownership 48.87%
Section(3
>(5%(Ownership
Holder(Name %(Outstanding Report(DateFidelity Management and Research Company 7.02% 12/31/14Wellington Managmant Company LLP 5.93% 12/31/14Vanguard Group, Inc. (The) 5.35% 12/31/14
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3) The extent of the (> 5%) owners by adding up all >5% ownership, and make an effort to identify those that are mutual funds
There aren’t any mutual funds that have over 5% ownership. Vanguard Health Care Fund accounts for the largest ownership with 3.31% outstanding, followed by Vanguard Total Stock Market Index At 1.72%. The rest of the holders are insignificant and account for just around 1% of shares outstanding.
4) Other observations worth noting? When we were looking at the institutional holdings it seemed like MSN overvalued the institutional holdings. When I cross checked the statistics with CNBC and Yahoo Finance they gave us a number closer to 90% rather than 98%.
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Section (H) Short Interest (Guidelines for H-‐2 Have Been Updated)
(H-‐1) Short Interest Data from http://www.nasdaq.com/ (NASDAQ’s website)
Copy/paste or type the information from “short interest” table for (1) your stock and (2) two competitors (in separate tables). You will start from the most recent release date, and go back for a year (some stocks may not have data going back 1 year) Copy/paste the chart to the right of the “short interest” table, immediately follow the table below
Activis PCL (ACT)
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Teva Pharmaceuticals (TEVA)
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Valeant Pharmaceuticals International (VRX)
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(H-‐2) Short Interest Data From http://finance.yahoo.com/
Copy/paste required data from the “share statistics” table to the following table for (1) your stock, and (2) two competitors (in separate tables).
Avg Vol Avg Vol Shares Float (3 month) (10 day) Outstanding
2,833,280 4,383,950 266.25M 265.36M
Shares Short Short Ratio Short % of Float Shares Short (as of 2/13/15) (as of 2/13/15) (as of 2/13/15) (Prior Month)
22.26M 9.00 12.80% 21.03M
1) Make note of the company’s (1) last earnings reporting date, and (2) next earnings
reporting date. Their last earnings report date was February 13th and the next comes on April 29th.
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2) Discuss market sentiment on the stock based on the short interest statistics, recent trend reported in in (H-‐1) and (H-‐2)? Has the sentiment turned more bullish or bearish over the last year? How about in more recent month and why?
Activis as of February 13th had a short ratio of 9, which is high relative to is competitors. What the high short ratio may indicate is a bearish outlook by analyst, which is inconstant with the consensus estimate analysis of the firm. The shares shorted have increased over one million from last month’s 21.03M.
3) From (H-‐1), observe “short interest” and “# of days to cover” values for two reporting dates immediately before and one reporting date immediately after earnings report. (1) Were there notable increase or decrease in the values, right before or right after earnings report? (2) Observe stock price chart and comment on how stock traded around those dates.
The last day that the short interest was reported was February 13th which was a few days before the earnings report. Because of the positive surprise in earnings we are assuming the number of short interest positions would have decreased d the days to cover would have decreased as well.
4) Other observations worth noting? Nope
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Section (I) Stock Charts (Guidelines for I-‐4 Have Been Updated)
For (I-‐1) – (I-‐3), the stock price charts should include (1) your stock, (2) 1 competitor, (3) sector ETF, and (4) SP500
(I-‐1) A three months price chart Copy/paste the “3 Mos.” stock chart here
(I-‐2) A one year price chart Copy/paste the “1 Yr” stock chart here
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(I-‐3) A five year price chart Copy/paste the “5 Yrs.” stock chart here
1) (I-‐1) – (I-‐3) Discuss what you observe from the above stock price charts. This should
include comparing your stock to competitors, sector, and SP500 over the three different time horizons.
ACT has over performed the market as well as the sector pretty significantly the past five years. With the activity going on throughout the company (acquisitions) it is obvious management has successfully produced strong numbers consistently. We compared Teva and Valeant on the 5 year chart and Valeant has significantly outperformed both Actavis and Teva. Traditionally the Healthcare sector isn’t too cyclical to the overall market so it isn’t a surprise that these companies have a large spread.
2) Other observations worth noting?
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(I-‐4) Technical Indicators (“Moving Average” and “Relative Strength Index” from https://www.google.com/finance?tab=we Short-‐term moving average and relative strength index indicators Follow instructions in the revised guidelines to generate price chart. Copy/Paste to the report
Long-‐term moving average and relative strength index indicators Follow instructions in the revised guidelines to generate price chart. Copy/Paste to the report
1) Discuss your findings from these sets of technical indicators. Compare your findings here to findings from fundamental analysis. Are findings from technical analysis supportive of your other findings?
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The simple moving average for both the long term and 1 year chart are Supportive of the technical findings. The steady revenue and earnings over the long run should have given us a clue that the average would be performing this well. The 10 day stays above the 50 day pretty much the whole time over the past year except when it dips in August and then again in October.
2) Other observations worth noting?
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Work Cited
Morningstar www.finance.yahoo.com www.cnbc.com www.reuters.com www.money.msn.com