Botox, Anyone?
When it comes to true love, the perception of beauty may well reside in the eye of the beholder; but, given that it often takes the spark of initial attraction to ignite the flames of more enduring affection, the first beholder of record is often the person who gazes in the mirror and sees, well, room for improvement. Coming to the rescue of those who consider themselves appearance-challenged is Allergan (AGN, $95), the purveyor of a vanity fair of Botox, lap bands, and breast implants. Lest you think that the company's business is only skin deep, we'll take a closer look.
Botox is a derivative of botulinum, one of the deadliest neurotoxins on the planet. In addition to my extreme aversion to needles, especially where my face is involved, the prospect of such treatment would have me fearing that I might emerge, post-injection, looking as if I had just stepped out of the studio makeup chair for a featured role in a Tim Burton movie. The only thing I'm going to shoot up is the occasional dose of B-12, and I would opt for a hair transplant before even worrying about wrinkles. However, the treatment has gained wide acceptance among those who both think they need it and can afford to pay for it. A feature of AGN that sets it apart from many other health care companies is that such cosmetic treatments are not covered by insurance. From the standpoint of investor perceptions, AGN stock does not offer the same defensive characteristics as many of the other firms in its industry, and that means that the shares are more sensitive to trends in consumer discretionary spending and the strength of the overall economy. On that point, though, I would suggest that AGN fits with our familiar "Tale of Two Cities" investment theme. Just as we have seen luxury goods providers such as Coach (COH, $77) and Ralph Lauren (RL, $176) thrive right alongside discounters such as Dollar Tree (DLTR, $95) and Ross Stores (ROST, $58), our economy provides a customer base for AGN that has the deep pockets to go with their deep brow furrows.
Moreover, what may surprise you about Allergan is that sales of Botox for so-called aesthetic uses accounted for just 49% of the product's total sales in 2011. (This is why we should rely on analyst research reports instead of Oprah for our investment information.) As for therapeutic applications, Botox is used to treat muscle spasms, underarm sweating, various eye disorders, and migraine headaches. The potential exists for other applications, such as the treatment of incontinence and enlargement of the prostate. The company's other products include Lumigan for the treatment of glaucoma; Restasis for tear-related eye disorders; and Alphagan, also for glaucoma. A medical expert was on CNBC the other day saying that lap band surgery is an effective treatment for diabetes, since Type II diabetes is typically linked to obesity. So, the Allergan reality is more compelling than just the popular notions about Botox. AGN stock is up about 30% over the past year, and as with all makers of drugs and medical devices, its future will depend on its success in research and development and bringing new treatments to the market.
Now, when I look in the mirror and think about ways I could improve my appearance, the first thing that comes to mind is that I could stand to lose a few pounds (just a few). There are, of course, many companies willing to sell you diet plans and various ways to slim down. One worth a closer look is Herbalife (HLF, $70), the network marketing company that offers a variety of nutritional supplements and weight loss products through a direct sales, multilevel marketing system. This means that if someone from HLF sells you the company's products, they may also attempt to recruit you as a distributor. While that may have you rolling your eyes with thoughts of the Amway salesman or the Avon lady knocking on your door, the reality is that HLF has made a tremendous success with this model, with the stock up about 72% over the past year. Direct selling means more frequent and personal contact between the buyer and seller, and that has been a driver for sales. I think there is generally a long-term trend toward healthier eating, so we might also want to consider old favorites like Whole Foods Market (WFM, $83) and Hain Celestial Group (HAIN, $45). For the more adventuresome, there is the newly-public Annie's (BNNY, $38), another maker of organic foods. Maybe eating organic macaroni and cheese really can help you slim down, but not if you eat five boxes of it for every meal.
Updates and News
It drives me crazy when I read about a stock in a publication or on a Website and then have the source never mention the stock again with any follow-ups or news. What I do here on this blog is not to offer you investment advice to buy or sell any stock, but rather to provide you with some very basic information about companies that I think are interesting enough that you might want to research them further or discuss them with your financial professional. With the goal of providing more in the way of follow-up, we'll start building an explicit list of the stocks we're following. Instead of calling this a "buy list" or a "model portfolio," I'll call it the "Radar Screen." I think that name most appropriately reflects and conveys the idea that there are stocks we want to monitor over time, always with the understanding that they may not be suitable for all investors. Another earnings reporting season is coming up with the end of the March quarter, so the Radar Screen is likely to see a lot of action over the next several weeks.
The FTC has approved the merger of Express Scripts (ESRX, $57.67) with Medco Health Solutions, and the deal has now closed. Some investment firms suspended their ratings on ESRX while the proposed merger was under review, and this morning (Tuesday) we saw a number of those firms hitting the newswires with reinstatements. Goldman has resumed coverage with a "Conviction Buy" rating and a price target of $70. The merger makes ESRX by far the largest Pharmacy Benefits Manager (PBM) in the country, and the combination will result in significant cost synergies. ESRX was up $2.17 in Tuesday's trading.
Shares of firearms maker Sturm Ruger (RGR, $51.51) are up about 22% over the last two weeks after the company reported that it couldn't take any more orders for its guns and was suspending taking additional orders until the end of May. The company had orders for one million units during the first quarter and simply doesn't have the immediate capacity to meet increasing demand. That's great news for the stock, but I'll leave an interpretation of the broader implications up to you.
Life is short. Get busy.
Jim
Disclosure/Disclaimer: My family members and/or I own shares of AGN, COH, RL, DLTR, ROST, HLF, WFM, HAIN, ESRX, and RGR. Individual stocks are mentioned here for the sole purpose of illustrating investment concepts, and nothing stated here should be construed as investment advice or the recommendation to buy or sell any security.
Updates and News
It drives me crazy when I read about a stock in a publication or on a Website and then have the source never mention the stock again with any follow-ups or news. What I do here on this blog is not to offer you investment advice to buy or sell any stock, but rather to provide you with some very basic information about companies that I think are interesting enough that you might want to research them further or discuss them with your financial professional. With the goal of providing more in the way of follow-up, we'll start building an explicit list of the stocks we're following. Instead of calling this a "buy list" or a "model portfolio," I'll call it the "Radar Screen." I think that name most appropriately reflects and conveys the idea that there are stocks we want to monitor over time, always with the understanding that they may not be suitable for all investors. Another earnings reporting season is coming up with the end of the March quarter, so the Radar Screen is likely to see a lot of action over the next several weeks.
The FTC has approved the merger of Express Scripts (ESRX, $57.67) with Medco Health Solutions, and the deal has now closed. Some investment firms suspended their ratings on ESRX while the proposed merger was under review, and this morning (Tuesday) we saw a number of those firms hitting the newswires with reinstatements. Goldman has resumed coverage with a "Conviction Buy" rating and a price target of $70. The merger makes ESRX by far the largest Pharmacy Benefits Manager (PBM) in the country, and the combination will result in significant cost synergies. ESRX was up $2.17 in Tuesday's trading.
Shares of firearms maker Sturm Ruger (RGR, $51.51) are up about 22% over the last two weeks after the company reported that it couldn't take any more orders for its guns and was suspending taking additional orders until the end of May. The company had orders for one million units during the first quarter and simply doesn't have the immediate capacity to meet increasing demand. That's great news for the stock, but I'll leave an interpretation of the broader implications up to you.
Life is short. Get busy.
Jim
Disclosure/Disclaimer: My family members and/or I own shares of AGN, COH, RL, DLTR, ROST, HLF, WFM, HAIN, ESRX, and RGR. Individual stocks are mentioned here for the sole purpose of illustrating investment concepts, and nothing stated here should be construed as investment advice or the recommendation to buy or sell any security.
No comments:
Post a Comment