Don't Cut and Run! Stay the Course!
Today was a mixed day for many investors, including myself. The Dow was up 90, the Nasdaq up 35, and the S&P500 closed up 12. So, it was a positive day for the market in general. However, if you were heavy in Pfizer (PFE), you got burned today. I was personally holding a few thousand shares of my long time favorite Big Pharma (PFE), and felt the pain from it's $2.96 drop.
However, DO NOT PANIC! Yes, it's very bad that Torcetrapib got cut. This will definitely hurt PFE in the long term. The fact that the drug made it to phase III clinical trials before it got weeded out is going to hurt; however, it's better that it get chopped now, than 6 months from now or even a year from now. PFE will now probably try to scoop up a handful of smaller companies, and maybe even go for a mega-merger to shore itself up for the long term. I have confidence in their new CEO, and think he'll pull them through this. So, if you are holding a position in PFE, stay the course, do not cut and run! The stock already bounced $1.40 from today's low, and will likely slowly crawl back up towards the $26 mark over the next 2-3 months. Also, it's unlikely that PFE will drop any farther than todays intraday low because of it's robust dividend.
So, final word on PFE: Hold it if you have it, and maybe consider adding to your position if you don't mind taking a little extra risk. If you're a big gambler, go after some small biotechs that have cholesterol drug lines as they may now be a PFE target.
An oddball buy: FUND, Royce Focus Trust Inc., just dropped 10.25% today to 10.51/share. They dropped this much because they have an annual dividend of $4.80/share. This is about 45%. So, if you hold this play for about 2.5 years, than you are at a 100% profit level. The only problem is, you'll have tons of volatility in this position at every ex-dividend date, but in truth, you can make bank on it in the long term. Another play along these lines, but which might actually make you some capital gains as well is FRO (Frontier Ltd.)
However, DO NOT PANIC! Yes, it's very bad that Torcetrapib got cut. This will definitely hurt PFE in the long term. The fact that the drug made it to phase III clinical trials before it got weeded out is going to hurt; however, it's better that it get chopped now, than 6 months from now or even a year from now. PFE will now probably try to scoop up a handful of smaller companies, and maybe even go for a mega-merger to shore itself up for the long term. I have confidence in their new CEO, and think he'll pull them through this. So, if you are holding a position in PFE, stay the course, do not cut and run! The stock already bounced $1.40 from today's low, and will likely slowly crawl back up towards the $26 mark over the next 2-3 months. Also, it's unlikely that PFE will drop any farther than todays intraday low because of it's robust dividend.
So, final word on PFE: Hold it if you have it, and maybe consider adding to your position if you don't mind taking a little extra risk. If you're a big gambler, go after some small biotechs that have cholesterol drug lines as they may now be a PFE target.
An oddball buy: FUND, Royce Focus Trust Inc., just dropped 10.25% today to 10.51/share. They dropped this much because they have an annual dividend of $4.80/share. This is about 45%. So, if you hold this play for about 2.5 years, than you are at a 100% profit level. The only problem is, you'll have tons of volatility in this position at every ex-dividend date, but in truth, you can make bank on it in the long term. Another play along these lines, but which might actually make you some capital gains as well is FRO (Frontier Ltd.)
Labels: dividends, DJIA, FRO, FUND, investing, market, money, Nasdaq, PFE, Pfizer, retirement, stocks, Torcetrapib, trading
posted by Dr. Cam at 4:26 PM
2 Comments:
FUND does not have an annual dividend of $4.80. That was based on the one distribution of $1.20. If you look at the longer term chart with dividends you will see that the payout per year is on avg. around $1.40. This is nowhere near your supposed $4.80. Be careful when you buy something based on some websites yield and check the distribution for the previous months to be sure.
Thanks for the clarification. I personally don't go stocks that are dividend plays... I like to trade too much for it. However, I was flipping through some notes I had, and decided it was worth a mention.
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