Quality Endures

04/07/2006 12:00 am EST

Focus:

Kelley Wright

Managing Editor, Investment Quality Trends

Proving that quality endures, we congratulate Geraldine Weiss  on her 80th birthday and on the 40th anniversary of Investment Quality Trends. Here, we share her recent comments as well as the latest advice from her successor, Kelley Wright.

"I was 40 years old when we published the first issue of Investment Quality Trends in April, 1966," says Geraldine Weiss. "We were the first ones to coin the words ‘Undervalued’ and ‘Overvalued’ in relation to stock prices. IQ Trends also is the first investment advisory service owned and operated by a woman. I hid behind the initial ‘G. Weiss’ and for many years most subscribers thought that the advice they received was from a man. I came out of the closet (so to speak) in 1983, on Lou Rukeyser’s Wall Street Week.

"IQ Trends has been a source of great pride and joy to me, personally. I believe in this concept of investing because over the years it has proved to be successful. Subscribers who follow the principles of quality and value have been well rewarded. Since 1966, I have written about one thousand articles, made hundreds of speeches at investment seminars, appeared on countless radio and TV shows, and co-authored two investment books. All of those words can be reduced to two sentences:

"To be successful in the stock market, one should confine investment selections to high quality, dividend-paying blue chip stocks. Buy them when they are ‘Undervalued’ (based on historic profiles of dividend yield) and sell them when they are ‘Overvalued.’ I know that is easier said than done. The investment world is full of alternate roads to riches and conflicting advice. But this is a method that works...as time and experience has proved. When I retired in 2002, I handed the reins of this service over to Kelley Wright, who has faithfully followed the approach to value through dividend yield and continues to include only high quality, dividend-paying blue chip stocks for investment consideration."

Kelley Wright continues, "The IQ Trends register of Select Blue Chips is an elite representation of the highest quality and most prosperous corporations in the country. One such blue chip is our latest featured stocks, Bristol-Myers Squibb (BMY NYSE). In the period following the Civil War, William Bristol and John Myers purchased a failing pharmaceutical company. The new company soon saw profits boom with the introduction of a mineral salt laxative Sal Hepatica and the first commercially available toothpaste to include a disinfectant.

"BMY’s pharmaceuticals segment represents 79% of the company’s net sales and is the major focus of operations worldwide. Over the past several years patent expirations have very notably plagued earnings in this segment. The company now appears to be nearing the end of a transition period with several new products ready for market and set for strong growth.

"Among these are Plavix, used to treat high cholesterol; Avapro, used to treat high blood pressure; Abilify, used to treat schizophrenia and related disorders; Reyataz, an HIV medication; Erbitux, a cancer medication; Baraclude, a hepatitis B medication ; and Orencia, an arthritis medication. Other products such as Glucophage, Taxol, and Pravachol will continue to be manufactured by the company but are expected to see declining revenue streams from generic competition.

"Nutritionals operations are run by a BMY subsidiary known as Mead Johnson. These products include a line of baby formula known as Enfamil. Nearly half of the company’s formula sales are eligible for WIC rebates, a government program to provide nutrition to infants and children of low income families. According to WIC, it serves 45% of all infants born in the US. In addition, BMY operates ConvaTec, a manufacturer of wound and skin care products, colostomy care and related products, and medical imaging.

"March was been notable for followers of BMY. The company has settled a lawsuit which focused on the patent of Plavix. This had placed a large cloud of uncertainty over the company, as Plavix remains the company’s best-selling medication. Sales during the fourth quarter declined slightly, by 3% from the same period last year. Earnings comparisons are skewed by a one-time charge in 2004. Because of sales losses from the Pravachol patent expiration, BMY expects earnings to fall in the range of $1.15 to $1.25 a share for 2006.

"The company has a market cap of $49 billion and approximately $6 billion in cash. At a recent price of $25, Bristol Myers is just moving from undervalue into a rising trend. At these levels, the company offers a generous 4.5% yield backed by a new line of emerging products. It appears that the worst of BMY’s trouble may now finally be behind it. Those with a particular taste for speculation may also be interested to know that rumors abound that BMY may be an acquisition target or merge with another smaller competitor."

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