Baxter: Bet on Bioscience

12/05/2013 7:00 am EST


Vita Nelson

Founding Publisher and Editor, Moneypaper

In most typical years, the stock market tends to rally in December, especially later in the month, after a bout of tax-loss selling has run its course, observes Vita Nelson in Direct Investment.

This late phenomenon is often a precursor to the ‘January Effect,’ when bargain hunters seek beaten-down stocks to ride higher in the new year.

But if we have learned anything in recent years, it may be that the typical year is not as common as it used to be. In 2013, for example, stocks sold off in August, only to rally in September and October, which are typically the weakest months of the year.

So, it would be wise to avoid the tendency to follow trends or seasonal expectations, and instead, focus on fundamentals (such as earnings and dividends) for the companies we own (or plan to own), and keep our sights on the long-term.

For example, our latest featured dividend reinvestment stock idea is Baxter International (BAX). Founded in 1931, Baxter International is a diversified medical products and services company.

Baxter operates two divisions: BioScience (44% of 2012 sales) produces blood collection and fractionation equipment, drugs, and vaccines, and Medical Products (56%) offers drug delivery systems, anesthesia products, and dialysis.

The company markets its products to hospitals, kidney dialysis centers, nursing homes, clinical and medical research laboratories, doctors' offices, and patients at home under physician supervision.

It had 2012 sales of $14 billion, manufactured its products in 27 countries, and sold them in more than 100.

Consensus estimates call for Baxter to earn about $4.66 per share this year and $5.05 in 2014, compared with $4.53 last year.

The number of shares outstanding has decreased from 650 million in 2006 to under 543 million today. The company has increased its dividend for seven straight years, to an annual rate of $1.96, providing a yield of 2.9%.

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