Saturday, July 26, 2008

Genzyme juggernaut rolls on

Genzyme reported Q2 results this week. With revenue up 21% on a like for like basis they were as solid as ever.

The amazing thing about Genzyme is that all its products keep growing on a quarterly basis, nearly all by double figure amounts. As it has about ten products this growth is diversified and consistent.

Genzyme generates excess cash which it used to invest in manufacturing capacity, strengthen its pipeline with acquisitions and buy back shares.

Genzyme is available for a 2008 PE of less than 20. As management have publicly stated that they are aiming to grow the EPS by 20% yearly up to 2011 this make Genzyme a great buy. It has defensive qualities and it is growing.

Last year I doubled up on Genzyme. With the declines of RBS and eBay it is now by biggest holding, showing a 20% gain while most of my other holdings have been falling.

Am I tempted to sell any? Absolutely not! My Genzyme shares are going nowhere. I have learnt by painful experience that taking a quick profit only guarantees that you never make spectacular gains.

Genzyme is a keeper.

Friday, July 18, 2008

eBay growth slows (again)

eBay reported Q2 results on Wednesday night and once again I wondered why they didn't just refer us to the Q1 results.

Marketplace growth is slowing, PayPal is doing great and Skype is growing fast but decelerating rapidly.

The headline numbers look good with revenue growth of 20% and EPS growth of 25%. However if you take out the FX benefits, revenue growth was only 13%. Even worse, GMV growth was a mere 4%.

eBay is of course a victim of its own success - its ubiquity in the marketplace sector makes rapid growth hard to achieve.

The market took a dim view of eBay's latest figures - yesterday the stock dropped almost 14%!

At $24.20 eBay is on a 2008 pro forma PE of 14. Astoundingly low for eBay and surely the stock is good value at these levels?

One day the multiple contraction will end and then if the share price can grow with the EPS at 20% I will be a happy investor.

For the moment I will just have to be a patient one.

Tuesday, July 15, 2008

AstraZeneca PLC

Time for a quick look at another FTSE100 constituent.

And, for once, an interesting one!

AstraZeneca (AZN) is a large, diversified pharmaceutical company.

The market cap. is about £34 Billion, the yield is about 4% and the PE about 10.

AZN markets a bewildering array of drugs, some of which are growing some of which are not. The number of drugs on its books makes it hard to analyse but does lower the risk of a single drug falling out of favour.

AZN has been buying back its own shares aggressively recently.

In the last quarter EPS grew about 10% and it is submitting 3 new drug applications this year.

That is a very short and dry summary of AZN. But overall I like it! As a defensive portfolio member with a healthy dividend yield it has a place.

One to add to the wish list.

Sunday, July 06, 2008

A pretty picture

They say that a picture speaks a hundred words. Well what does this picture say?
To me it says stop thinking about your portfolio for a few months. The market is ugly, valuations seem almost meaningless and who knows where the bottom is. Those who moved to cash at some point in the last year are looking clever. However I don't attempt to time the market so I just have to grin and bear it.
The one consolation is that my performance is more or less in line with the market. In fact as I have a large stake in Genzyme which has proved very resilient my performance may be slightly better.
As I am not a trader this may be a good time to concentrate on home improvements and gardening and let the stock market do its thing until it settles down again. Hopefully some sort of sanity will be restored in the autumn.

This is not time to give up on the stock market. It is a great time to buy into high quality companies on a monthly basis. That way at least one of your purchases will be near the bottom and in the meantime you will be averaging down.
Tesco at 360p looks good to me and yes I am practising what I preach, buying some more every month.
Hopefully in five years I will be able to look back and think about the bargains I got in the summer of 2008!
One final point. This decade is starting to look like a poor one for investing. The market may only end up where it started. But as I do not need to sell my shares this decade that is OK. I will keep buying cheap shares and hopefully the next decade will be more rewarding!