Blog

Generic vs. Branded Pharma: Hmm…

Given the negativity surrounding generic pharma companies in the U.S., we are quite puzzled by the valuations of branded pharma companies such as Pfizer, Merck and JNJ. After all, weren’t generic companies the “good” guys who were supposed to give us cheaper alternatives to the expensive branded medicines of the likes of Pfizer, Merck and JNJ?

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Stronger Than Ever? Ha!

It was just over a year ago that Erez Vigodman, President and CEO of Teva Pharmaceutical Industries proclaimed in a press release: “The acquisition of Actavis Generics comes at a time when Teva is stronger than ever—in both our generics and specialty businesses.” What a difference a year can make!

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Eureka!

For millennia, inventors have tried to build perpetual motion devices that could perform work indefinitely without an energy source. So far, this quest has proven futile as the laws of thermodynamics apparently dictated against the possibility of building such a device. But, as it turns out, and US equity investors already know, perpetual motion is possible after all!

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13 US Equities: Acquired or Bust

Given the euphoria prevalent in many global equity markets, especially so in the US market, we decided to compile the following list. It’s a list of 13 US equities that are, in our view, likely to cause investors substantial losses over time – unless these equities and their investors are saved by an acquisition. These equities may represent the ultimate speculations in today’s equity market in the sense that their prices can only be supported by what other people may pay for them.

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When a Global Duopoly Ends

You wouldn’t know it from the share prices of Boeing and Airbus (which are at all time highs), but this famous global duopoly on passenger jets is coming to an end. As China Aviation Review reported this weekend, the C919 – China’s first self-developed large passenger jet – is currently completing final tests and is due to have its maiden flight within the next few weeks.

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Value vs. What

A Google search for the word string “value vs. growth” returns 145 million results. A Google search for “intrinsic value” returns 4 million results. We think this is symptomatic of much that is deficient in how value investing is perceived by the majority of market participants. So, we would like to posit that the “value” in value investing refers to “intrinsic value” rather than a value concept that needs to stand in contrast to “growth.”

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A Favorite Warren Buffett Quote – Revisited

In the investment world, as well as in the world of economics and politics, it is hard to escape the all-around obsession with growth. Often without a clear definition or discussion of direct costs or externalities, growth is presented as something to be worshipped – no matter what. Whether it relates to the growth in the economy or in a specific industry, this obsession tends to cloud judgments, distort incentives and, ultimately, can lead to

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Too Big to Be Bought

In the ocean world, orcas are considered apex predators. They are at the top of the food chain and are even known to hunt whales and large sharks. Orcas may therefore be considered too big to be eaten by anyone (except for humans of course). This is certainly good news for orcas and bad news for smaller ocean creatures like seals. In the investment world, however, the reverse may be true.

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$2.7 Trillion

From the composition of US equity indices to our everyday lifestyles, it’s hard to ignore the impact of Apple, Google, Amazon, Facebook and Microsoft. These five companies combined account for $2.7 trillion of equity market capitalization. Incidentally, this figure is roughly equivalent to the total value of farmland and buildings in the United States as of 2015.

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Low Rates, Lowly Management

Conventional wisdom seems to dictate that a low level of interest rates is beneficial for equities. In fact, it’s made out to be something that is beneficial for society. But consider the following two examples: 1) Valeant Pharmaceuticals: Without low interest rates, this company would arguably not have been able to execute its flawed business model. Certainly not to the extent that it has done.

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