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Actionable news in TEVA: TEVA PHARMACEUTICAL INDUSTRIES LIMITED AMERICAN DEPOSITARY SHARES,

Teva Offers A Smoother Climb

Summary

Pharmaceuticals have been beaten up from perceived policy risks, but low-cost generics won't be a target.

Teva trades at lower multiples, grows faster and has less risk than the median S&P500 company.

Teva is appropriate for total return and wealth preservation investors.

The stock currently yields about 2.5% and the dividend is well covered.

How We Got Here

Record profits, dividends and GDP do not make for cheap security prices. In such an environment one would expect defensive stocks to be particularly expensive as investors grow wary of the inevitable pullback. Indeed, the median price-to-earnings ratio of both the Vanguard Consumer Staples ETF (NYSEARCA: VDC) and the Vanguard Health Care ETF (NYSEARCA: VHT) is 25.

Within the healthcare industry, many pharmaceutical companies are no longer at such lofty prices. The travails of Valeant Pharmaceuticals (NYSE: VRX) and corresponding negative campaign rhetoric have weighed on valuations that were already feeling the hangover of the biotech bull market earlier this decade.

Valeant has been highly criticized for its practice of buying moderately priced drugs and drastically increasing their price. Presidential candidates and politicians have criticized the practice and demanded legislation to control prices. Investors fear that these price controls may extend beyond the practices of Valeant to less extreme operators and drug developers.

Your friends at Born Investment Management have gone bargain hunting in the wreckage. One would expect a low-cost leader in generic drug production like Teva...


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