After and during market runups I like to look for stocks to sell. I have a full position in Pfizer (PFE – $26.62) and the company has been plagued by drugs going off patent, lawsuits and a couple bad FDA rulings. However, a value screen and my contrarian heart tell me I have to hold on and collect my fat 4.3% dividend for a while longer.
With widely followed companies like Pfizer (PFE), First Call usually provides most of the information I need to do a quick but reasonably thorough value screen. 2007 and 2008 average analyst earnings predictions come in at $2.20 and $2.34/share respectively. That translates into a price earnings multiples of 12.1 and 11.4, which are quite low for a stock with expected earnings growth. Additionally, I like the fact that recent analyst earnings revisions have been to the upside (Analyst revision direction is one of the most reliable indicators for a stock I know). The contrarian in me likes that all this value and upward earnings revision are happening in the face of an average analyst rating of "hold". Of the twenty-four analysts surveyed by First Call, sixteen have a "hold" rating and only seven have a "buy" or "strong buy". ("underperform" is the other one). Once all these analysts forget about the wounds they've suffered by giving PFE buy ratings when the stock was in the high 20's, they'll start recommending it. I feel that's when buying may start. We saw something similar with Merck (MRK) last year.
Disclosures and Confessions: I own Pfizer (PFE). I have traded Pfizer (bought and sold) and options in the past two years. My average cost is $25.97. I own Merck (MRK). I have traded Merck in the past two years and my last trade in June 2006 was a sale to reduce my position. I am contemplating an additional sale of Merck Co Inc.
Disclaimer: Nothing in this trade log is meant to be specific financial advice or a recommendation to buy or sell. I do not give investment advice. Do your own research. Do not rely on anything in this weblog to make investment decisions. I do not log all my trades here. I only describe or mention those that I think might be interesting. Consult an investment professional familiar with your specific financial situation before buying or selling any security.