Wednesday, January 04, 2012

Abbott Labs (ABT) 2012 Review

Abbott Labs (ABT) develops, manufactures and markets a diversified line of healthcare products including pharmaceuticals, diagnostic systems and tests and pediatric nutritional products.

ABT has grown profits and dividends between 8-9% over the last 10 years earning in excess of a 25% return on equity. Expectations are for an even better performance over the next five years making it one of the fastest growing major US pharmaceutical/medical device companies. The primary components of future growth are:

(1) strong revenue increases from several major drugs including Humeria, an anti-inflammatory whose sales are growing in excess of 20% a year, TriCor, a powerful triglyceride lowering agent and XIENCE V, a drug eluding stent which offers superior differentiating characteristics to those of its competitors,

(2) an aggressive acquisition program that has recently added Piramal Healthcare Solutions, a leading producer of generic drugs in the international market, Advanced Medical Optics, which has a premier position in the eye care market, Solvay which has a strong presence in Europe as well as numerous small acquisitions,

(3) a committed R&D program with several high potential drugs for the treatment of Crohn’s disease and psoriasis and has a significant clinical effort in immunology, oncology, neuroscience, pain management and infectious diseases.


(1) pricing pressure from the EU as well as US healthcare reform,

(2) generic competition,

(3) potential pipeline and regulatory setbacks.

Abbott Labs is rated A++ by Value Line, its stock provides a 3.8% yield and debt is approximately 39% of its capitalization.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2002
ABT 3.8% 9% 39% 10
IND 3.2 6* 41 NA

Debt/Equity ROE EPS Down Since 2002 Net Margin Value Line Rating
ABT 39% 28% 0 19% A++
IND 15 16 NA 20 NA

*over half the companies in this industry don’t pay dividends.


Note: ABT stock made decent progress off its March 2009 low, though it took considerable time to surpass the down trend off its September 2008 high (red line) and the November 2008 trading high (green line). The stock is in a long term up trend (straight blue lines) as well as an intermediate term up trend (purple lines) and a short term up trend (brown line). The wiggly blue line is on balance volume. The Dividend Growth Portfolio owns a full position in ABT, having Sold stock at $53-54 in mid to late 2010 and Bought it back in early 2011 at $46.

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.