Hi Friends – Long time, no speak!
This summer has been a busy one. Especially for Mr. Market. There have been so many swings caused from anything as small as a small comment made by a US Presidential candidate to something as big as one of Europe’s largest economies deciding to leave the EU (#brexit). So, to say it’s been hard to time the market, is putting things mildly. However, as I mentioned many times before, time in the market is much more important than timing the market; which means when I have the money in hand and I find a compelling buy, I should pull the trigger. Which is exactly how I came to own this next buy.
I purchased 8 shares of Amgen, Inc. (AMGN) on 6/16/2016 for $150.84 per share.
Amgen, Inc. is the worlds largest independent biotechnology company that works in discovering, developing, manufacturing & delivering human therapeutics worldwide. Their principal products include Nuelesta/Neupogen which are used to prevent infections in patients undergoing cancer chemotherapy; Enbrel, used in the treatment of rheumatoid arthritis and other autoimmune diseases; and Epogen, used to treat anemia.
AMGN makes money by selling these medicines/treatments to treat diseases/life threatening illnesses. Since they hold patents to prevent other healthcare competitors from creating generic brand options, they not only have 100% market share but they also have a multi-year head start before competitors can come in and start developing their own versions of the medicines. Their customers are typically patients through pharmaceutical wholesale distributors, physicians (in clinics, dialysis centers, hospitals and pharmacies), and direct consumers.
- Revenue grew by approximately 10% over the last 5 years.
- EPS is 9.06 and has increased by 24.6% over the last 5 years.
- Dividend yield at time of purchase was 2.65% and AMGN pays a dividend of $4 per share. AMGN has been increasing dividends for 6 years and the payout ratio is currently 35.6%.
- Debt/Equity ratio: 1.04
As a biotechnology firm, Amgen is not without its risks. While they do hold multiyear patents that prevent other companies from competing in the same space, there are many other macro risks that affect Amgen; particularly in the US. Drug pricing issues, uncertainty about health care policies with the next US president and an overall lack of investor confidence in the industry present risks that one should be cognizant of when evaluating this company.
- The P/E at the time of purchase was 16.1 which is lower than AMGN 5 year average of 17.8.
- Morningstar valuation (at time of purchase): $153, rated a 5 star “BUY”
- S&P Capital IQ valuation (at time of purchase): $171.20, rated a 4 star “BUY”
Amgen overall is an attractively valued company. Fortunately/Unfortunately, there has been a run up in the stock price (price is $170.68 per share at the time this post was published). However, I do feel that this is a still a great entry price for someone to initiate a new position in this company. In the biotech industry, AMGN is regarded as a leader and is highly respected. With a good balance sheet, low dividend payout ratio and attractive entry price, I am happy with my latest purchase and will look for more opportunities to acquire more.
This purchase adds $32 to my annual dividend income based on the current $1.00 quarterly dividend.
Full disclosure: Long AMGN
Thanks for reading.
Images: Death to the Stock Photo with graphics added by One Woman’s Worth.