David Fried’s The Buyback Letter has an unusual investing system; it focuses solely on the stocks of companies that buy back their stock in the open market. Over the long term, the strategy has worked: last month, Hulbert Financial Digest Editor Mark Hulbert wrote, “The HFD began monitoring The Buyback Letter at the beginning of 1997. Since then, the newsletter’s portfolios on average have produced an 11.1% annualized return, in contrast to 6.5% for the Wilshire 5000 Total Market Index. Not only have the letter’s portfolios outperformed a buy-and-hold, they have done so with slightly less risk than the overall market.” Here is a new recommendation from The Buyback Letter Premium Portfolio, by David Fried.
“We bought biotech giant Amgen, Inc. (AMGN) a couple of times back in 2009, with the last one (November-December 2009) returning a 9.30% one-month profit. Now it has floated to the top of our filters and radar again.
“Amgen discovers, develops, manufactures and delivers human therapeutics. A biotechnology pioneer since 1980, Amgen was one of the first companies to realize biotech’s promise by bringing safe, effective medicines from lab to manufacturing plant to patient. Amgen therapeutics have helped millions of people around the world in the fight against cancer, kidney disease, rheumatoid arthritis, bone disease and other serious illnesses.
“Amgen has a deep and broad pipeline of potential new medicines, and has strong partners — such as Wyeth, Pfizer and Johnson & Johnson — for some of its products. Ups and downs with some of its drugs made the news lately, including good news about the experimental drug rilotumamab, which showed promising results for patients with gastric cancer. Amgen had previously set the drug aside after an earlier disappointing study, but a look at fresh data revived interest.
“These types of results are an example of a significant shift taking place in how drugs are discovered and who they’ll work best for. It’s called ‘personalized medicine,’ which involves determining whether a patient is genetically susceptible to a particular disease or would be especially responsive to certain treatments. These therapies have increased fivefold since 2006, with more than 72 available now.
“This approach is becoming more important for drugmakers, to reduce the time and cost of testing therapies and increase the chances of success.
“First-quarter earnings per share were $1.59, 20.5% above the year-ago period. A lower tax rate, lower share count and higher revenues contributed to the year-over-year increase in earnings. Total revenue increased 9.2% to $4,048 million. For 2012, the company expects earnings in the range of $5.90-$6.15 per share on revenues of $16.1-$16.5 billion.
“During the first quarter of 2012, Amgen repurchased some $1.4 billion in stock. In the last 12 months, management has reduced shares outstanding by 6%. Buy.”
- David R. Fried, The Buyback Letter Premium Portfolio, May 22, 2012