Search results matching tag 'Merck'

3 blue-ribbon stocks on sale

CAPS Editor — Thu, 03 Sep 2009 21:48:00 GMT

This post comes from Morgan Housel at partner site The Motley Fool.

Even with the recent rally, it's ugly out there. Many companies that overleveraged their balance sheets are permanently impaired and will likely never fully rebound. Citigroup (C) and Fannie Mae (FNM) come to mind.

We had an unprecedented boom; now we're slowly trying to claw out of an unprecedented bust. That's how markets work.

Even so, history tells us that market panics and forced sell-offs indiscriminately throw the good out with the bad. The "sell-now-ask-questions-later" mood of global investors is providing bargain-hunting investors with the sort of opportunities we haven't seen in decades. Use that to your advantage.

I've consulted with MSN CAPS, the investment community organized to help individuals beat the market, to hunt down a trio of dirt cheap, high-quality companies.

Bing: What does MSN CAPS do?

Each has a four-star rating at CAPS. While top-rated five-star stocks obviously have bullish consensus, we've found that stocks moving up from three stars to four are likely being driven by "smart money." By getting in early, investors may be able to eke out a few extra percentage points of gain from these equities. So it's worthwhile to sift through the CAPS database to find four-star companies that could be on the cusp of achieving a bullish consensus among investors.

Have a look:

Consolidated Edison (ED) delivers electricity to more than 3 million residences and businesses in New York City, and natural gas to more than 1 million customers. The company has a 7% return on equity over the trailing 12 months and a five-year expected growth rate of 3.4%. The stock has dividend yield of 5.9% and trades at a forward price-to-earnings ratio of 12.

Merck (MRK) is one of the nation's biggest pharmaceuticals companies, and it's getting bigger -- it has agreed to acquire New Jersey neighbor Schering-Plough (SGP) for $41 billion. Merck has a 28% return on equity over the trailing 12 months and a five-year expected growth rate of 3%. The stock has dividend yield of 4.8% and trades at a forward price-to-earnings ratio of 9.

Automatic Data Processing (ADP) helps about 580,000 clients worldwide meet payroll, file taxes and manage data. The Roseland, N.J., company has a 23% return on equity over the trailing 12 months and a five-year expected growth rate of 11.3%. The stock has dividend yield of 3.5% and trades at a forward price-to-earnings ratio of 15.

Let's break down the bullish argument for each one.

Still in a defensive mode

Sure, an electric utility is as boring as boring comes. But a company like Con Edison is quite stable, and pays an enormous dividend of nearly 6%. Safe returns of this magnitude should not be belittled, especially in times like these.

As CAPS member "risenodoz" wrote about the company:

"Safe play, with dividend. Tri-state area (New York, New Jersey, Pennsylvania) is in no rush to deregulate utilities. With liberals (most likely) in control of the country for the next 4-8 years, they should be a safe bet to continue to hold on to their monopoly."

Analyst Brian Chin at Citi Investment Research recently raised his price target on Con Edison shares by $3 to $43 and said that economic data suggests an industrial recovery is nearing, which could justify a more risk-tolerant stance among utility investors.

Real reform starts here

Death panels! Socialism! The end of free choice! The end of the world!

These talking points are good for town hall debates and the cable news networks. They're also good for scaring the pants off of health care investors, some of whom want nothing to do with the industry until the smoke clears. But whatever landscape emerges from health care reform is likely to be advantageous to drug companies like Merck.

Merck's pipeline stinks, which makes the growth crowd squirm. Fair enough. But much of this is already priced into a stock trading at nine times earnings and spitting out a 4.8% dividend.

As CAPS member "saunafool" wrote last year:

"No matter what happens to the economy, people are still going to take their medicines. All these (drug) companies are going to survive the turmoil better than most, and they'll still be standing, just like Elton John, 10 years from now, with compounded dividends aplenty."

Merck is reorganizing ahead of the Schering-Plough acquisition to try to take advantage of opportunities in such high-growth areas as emerging markets, biologics and vaccines.

Putting money to work

How much worse will unemployment get? That's what investors want to know when evaluating Automatic Data Processing. The payroll processor will be among the beneficiaries when companies stop shedding workers.

Some might say that at 15 times forward earnings, shares of ADP aren't cheap. But you have to put value in perspective: ADP, along with smaller rival Paychex (PAYX), virtually controls the market for outsourced payroll processing and benefits administration. They generate staggering returns on capital. It's worth paying a premium for companies like these.

Have your own take on any of these companies? More than 135,000 investors use CAPS to share ideas and swap opinions. Click here to check it out and speak your mind. It's 100% free to participate.

Morgan Housel did not own or control shares of any company mentioned in this article.

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Rising stars: 5 nearly great stocks

CAPS Editor — Wed, 19 Aug 2009 18:47:00 GMT

This post comes from Rich Duprey at partner site The Motley Fool.

Some companies are obviously great investments -- in hindsight. Yet for every stock screaming "Buy me!" others simply give us a nudge and a nod.

How can we isolate tomorrow's great investments from the thousands of pretenders? At MSN CAPS, these opportunities are frequently found among four-star stocks.

Top-rated five-star stocks obviously have bullish consensus, but we've found that stocks moving up from three stars to four are likely being driven by "smart money." By getting in early, investors may be able to eke out a few extra percentage points of gain from these equities.

That's why it's worthwhile to sift through the CAPS database to find four-star companies that could be on the cusp of achieving a bullish consensus among investors.

Here is a handful of four-star stocks:

AT&T (T) is down 12% year to date. The nation's biggest provider of local and long-distance telephone service trades at a forward price-to-earnings ratio of 11 and has per-share earnings of $2.02.

Merck (MRK) is up 3% year to date. The drug maker trades at a forward price-to-earnings ratio of 9 and has per-share earnings of $2.70.

Monsanto (MON) is up 15% year to date. The supplier of herbicides, seeds and other agricultural products trades at a forward price-to-earnings ratio of 19 and has per-share earnings of $3.90. (See Jubak: Monsanto speaks out)

Nvidia (NVDA) is up 62% in 2009. The maker of chips used for computer graphics trades at a forward price-to-earnings ratio of 34 and has a per-share loss of 73 cents.

The U.S. Natural Gas (UNG) exchange-traded fund for the natural gas market is down 48% so far in 2009.

Some of these names might surprise you. AT&T is nearly great? Even familiar names can offer opportunities, and perhaps we've forgotten the potential they still hold.

Natural gas prices at 7-year low

Natural gas producers have lagged the broader market as the recession diminished demand for natural gas, used to generate about a quarter of the nation's electricity and heat more than half of U.S. homes. A glut of gas has driven the price to a seven-year low of $3.09 per million British thermal units, from more than $13 per million Btu last year.

As the economy improves and electricity use grows, you might want to put your money in a natural-gas play like Chesapeake Energy (CHK) or XTO Energy (XTO).

At this point, that's not what U.S. Natural Gas is all about, though. It's the world's largest commodities ETF that tracks the underlying basket of securities and futures contracts on natural gas.

Find on Bing: More about exchange-traded funds

Futures pools like U.S. Natural Gas need to issue shares on a regular basis to track the underlying shares. The fund typically rolls over its positions every month as contracts expire.

But management has not issued new shares since July on concern that federal regulators will keep it from investing in natural gas. The fund is now more like a closed-end fund, and it has been trading at a huge premium to its net asset value.

The fund's managers said they won Securities and Exchange Commission approval to issue 1 billion new shares, which would allow the fund to nearly triple in size. But plans are on hold while the Commodity Futures Trading Commission investigates whether speculators are distorting prices for oil and natural gas. The CFTC is weighing whether to impose position limits or strict caps on how many contracts a trader can hold.

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It isn't clear whether the commission will ultimately initiate action that requires U.S. Natural Gas to alter its investment objectives; the agency plans to issue a report this month making the case for increased regulation of swaps dealers and index investors.

Citigroup says U.S. Natural Gas controls a quarter to one-third of all open-interest contracts on the Nymex and the Intercontinental Exchange, and is thereby creating abnormal demand and propping up prices.

With regulators considering new rules that would limit the size of positions that commodity funds can hold, U.S. Natural Gas opted to not issue shares that might push it over those limits and require management to divest the ETF's positions.

Fraught with danger for the average investor

In short, the fund is fraught with danger for the average investor, regardless of what the CFTC does. The risk, though, has nothing to do with natural gas as an investment and everything to do with the decisions regulators make in Washington.

Do investors understand the risks? Although 97% of the more than 1,250 CAPS members rating the natural gas ETF mark it to outperform, CAPS member "bladedog" argues that its current premium is untenable. Another CAPS participant, "herztical," seems to understand the situation and blogs that a more market-based approach would let things work out naturally. He remains a UNG bull.

"Finally, as with any asset class, the market will correct itself if it swings too much to one side or another," writes herztical. "If we can take anything away from last year's oil spike and subsequent collapse, it is that eventually true supply and demand will dictate price. . . . Besides, do we really need more government interference and regulation? I say let the market decide if it wants these ETFs around. If they don't prove themselves, well, there is no need to worry about regulating them because they won't be around for long."

Investor sentiment suggests that these four-star investments seem to be on their way to five-star greatness, but it pays to start your own research on these and any other stocks on CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page.

Turn to member blogs for insight and opinion. And use the CAPS stock screener tool to find your own list of companies that satisfy your investment criteria. Sign up today for the completely free service, and let us hear what you have to say about the great -- and nearly great -- companies that interest you.

Starbucks hopes for earnings buzz

Minyanville — Tue, 21 Jul 2009 12:46:00 GMT

One to Watch: Starbucks (SBUX) will be hoping for fat profits at the close, even as it unloads complementary calories on customers in a pastry promotion during the day. The coffee king reports quarterly earnings and could use a jolt of good news. Growth has stalled as frugalistas forsake fancy frappuccinos for Folger's in fits of penny pinching pique. Add in costly cannibalization due to chronic overexpansion and an aggressive ad campaign by upstart McDonald’s (MCD) (”four bucks is dumb”) and many see the stock as a has "bean." Shutting subpar stores and regaining its former focus could see the company revive, but becoming buzz-worthy again is an altogether tougher task.

What Just Happened: Hillary Clinton continued her passage to India, currying favor with the country’s rapidly multiplying millionaires. Texas Instruments (TXN) entered middle age as it posted a 56% profit plunge 50 years after introducing the microchip. Stocks rose once more on the back of agreeable comments from Street strategy gurus and another uptick in Leading Economic Indicators. Though the LEI may l-i-e, judging by an article in today’s New York Times about how shuttered stores adorn even Madison Avenue in these tough times.

What’s Happening: The same paper reports Spanish bank robberies are on the rise. Something Santander can afford more than most, as it’s up after a positive article in the current Barron's. Hermes said first-half sales gained over 7%, testament to an ability to make silk purses (or scarves) from sow’s ears even in a recession. Shares rose slightly in overseas action. Here at home, futures are indicating a steady open at this hour, perhaps the pause that refreshes after six successive strong sessions out of the Dow.

What Will Happen: It’s all quiet in economics but Fed chief Ben Bernanke heads to the Hill for his twice-yearly Humphrey-Hawkins testimony, always closely watched by the bond market. In a caffeinated day for earnings, expect announcements out of Coca-Cola (KO), Apple (AAPL), Schering-Plough (SGP), Merck (MRK), Yahoo (YHOO), UnitedHealth (UNH) and United Technologies (UTX).

Happenstance: The olde English expression “where there’s muck, there’s brass” holds true in New York, too, judging by this recent treasure found in the trash.

Top Stocks blogging partner Todd Harrison is founder & CEO of Minyanville.com. This post was written by Minyanville Contributor Justin Sharon.

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Five reasons why Abercrombie's stock looks pumped

Minyanville — Mon, 22 Jun 2009 17:12:00 GMT

Here's what I’m focused on this fine Monday morning:

Abercrombie & Fitch (ANF):
Those of you that actively follow Ticker Shock know I’m sweet on retail stocks for the long run. This is simply because I believe there's a huge amount of upside potential to be had, as Americans are generally big spenders.

In spite of my longer-term bullish outlook, I haven’t been so crazy about Abercrombie & Fitch, as of late. After all, its first-quarter results left a lot to be desired. Additionally, its stock has seen better days.

However, there was some positive news that deserved a little more attention than it got. The news came out last week that it's going to close its Ruehl stores.

My thoughts:

1. The idea of closing the concept is a good one, if for no other reason than its recent comp-store results were awful, making the overall company look bad. In May, the concept’s comps (Ruehl’s) were down 33%. In April, they were off 30%.

2. This move sends a message to the Street that it’s not going to sit idly by and accept such underperformance.

3. If this economy gets fired up, this is one retailer that could really smoke. I’m particularly taken in because it seems the Street’s overall expectations are very low.

4. I wouldn’t mind seeing executives try the stock on for size. That would impress the Street and give existing shareholders a bit more confidence.

5. I’m wondering if we could start to see the estimates for next year ratchet higher?

These guys have my attention and are on my watch list. Stay tuned.

Yahoo (YHOO):
A couple of quick comments here on news that was being circulated after the bell on Friday:

“Yahoo Inc. said it will incur $22 million to $27 million in restructuring charges in the current quarter to account for previously announced layoffs of 5% of its staff. The Internet company detailed the charges in a regulatory filing on Friday, 2 months after CEO Carol Bartz announced plans to cut nearly 700 jobs.”

My thoughts:

1. Nobody likes when the word “charge” is thrown around, but I think the move is a good thing. I’m glad Bartz seems to be getting off the dime, and I expect more from her on the cost-cutting front (and in other areas) going forward.

2. I know I’ve said it previously, but I'm going to offer it again: I wouldn’t count out the possibility that Microsoft (MSFT) and Yahoo could still end up in a warm embrace. I’m a bull, what can I say?

Goodyear Tire (GT):
Per the Associated Press:

“The Goodyear Tire & Rubber Co. is offering buyout packages to 550 workers at its tire plant in Union City, Tennessee, as the company reduces costs due to weak demand. Goodyear, the biggest US tiremaker, said the downsizing will result in an after-tax restructuring charge of approximately $60 million primarily in the second quarter of 2009.”

My thoughts on the overall situation:

1. The news doesn’t affect my long-term feel that this stock is a great play. My big-picture thinking is as stupidly simple as this: Over time, populations will likely increase. Therefore, the number of all types of vehicles will go up, increasing the demand for tires. Unless, of course, I’m totally wrong and the Flintstone mobile finally becomes a reality.

2. Obviously, I’m not too crazy about the loss that analysts are predicting this year. But if it can hit the $1.21 estimate for 2010, the stock could have some nice upside from these current levels.

Walgreen Co. (WAG):
I certainly don’t think the big-name drug store’s earnings results are going to be a cure-all. But they weren’t all that bad, either.

In the period, it earned $0.53; analysts were looking for $0.56. Meanwhile, its sales line came in a bit north of $16.2 billion, which did appear to be better than expected.

My thoughts:

1. I'd hoped the bottom line would've come in a little better, and I’m guessing investors did, too.

2. With the larger market looking like it could take a hit at the open and these not-so-terrific numbers, it may take a hit in early trading.

3. I'd view a sell-off as an opportunity. Ideally I’d like to pop open this prescription bottle in the mid $20s.

4. It's going to need a few quarters of beating expectations for investors to really warm up to this story again.

Merck (MRK):
There was some news out this morning that deserves a look.

According to the Associated Press:

“Drugmakers Merck and Co. and Schering-Plough Corp. (SGP), which are in the process of a $41.1 billion tie-up, said Monday the Federal Trade Commission has asked for more information about the deal. Merck of Whitehouse Station, NJ, and Schering-Plough, Kenilworth, NJ, said they expected the request, which was made under federal antitrust law. The companies intend to cooperate with the request.”

I'm not reading into this news one way or the other. That said, if something happens and the deal gets nixed, I think the shares of both companies get battered like a screen door in a hurricane. I think both Merck and Schering need this combination to happen.

Have a great day!

Top Stocks blogging partner Todd Harrison is founder & CEO of Minyanville.com. This post was written by Minyanville Contributor Glenn Curtis.

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Even the big boys get computer crashes

Charley Blaine — Fri, 12 Jun 2009 16:47:00 GMT

Updated at 6:10 p.m. ET. Think you have it tough when your computer crashes?

Think what a glitch means to the New York Stock Exchange, which was forced to halt floor trading on some 242 stocks late this morning.

The group apparently included no fewer than seven stocks in the Dow Jones Industrial Average ($INDU), including Exxon Mobil (XOM), General Electric (GE), Bank of America (BAC) and Merck (MRK).

The halt lasted more than 30 minutes, resuming at 12:10 p.m. ET, Bloomberg News said.

Floor trading is the traditional way stocks are traded: One broker comes to the post where a stock is traded and bids a price for a set number of shares. It's either accepted by another broker at the post or the specialist in the stock (who manages the trading to keep the flow moving up or down), or a bit of haggling ensues until the transaction is done.

Then the transaction is entered into the NYSE's computer system via a wireless device.

Understand something about the exchange's computer system: It's one of the largest private systems in the world -- if not the largest.

While floor trading was halted, electronic trading continued in all of the stocks. So, it's not clear if the glitch at the NYSE (caused by the changeover of three computer servers) affected prices much.

It probably affected things a bit. Bloomberg said that total volume slowed to 3.98 billion shares as of 12:25 p.m. ET in New York, compared with an average for the week at that time of 4.24 billion shares. In any event, NYSE spokesman Ray Pellecchia said the exchange was not planning on canceling trades in the affected stocks.

It's possible that the glitch did affect shares of the NYSE's parent, NYSE Euronext (NYX), very briefly and not by much. The shares were at $29.50 at 11:25 a.m. ET, dropped to $29.35 by 12:10 p.m.

At the close, the shares were at $29.81, down 0.7% on the day. The shares are up 8.9% for the year amd 97.4% since bottoming on March 5.

Market insiders get defensive

Anthony Mirhaydari — Wed, 13 May 2009 17:41:00 GMT

It looks like big investors are rotating out of cyclical positions -- especially bank stocks -- in favor of defensive positions.

By supporting the most heavily traded issues during Tuesday's session, mostly the 30 Dow components, the hedge-fund types tried to mask their escapes. This explains the diverging performances of the various indices, with small caps and transportation stocks being hurt badly.

The market internals gurus at Lowry's weren't fooled by the smokescreen the retreating bulls left in their wake: They found a 5 point drop in buying power and a 6 point rise in selling pressure despite the fact the Dow Industrials actually gained 50 points for the day. This was enough to trigger two of their sell signals, which means it is likely we are in the midst of the correction I've been expecting (see posts here and here).

Health care and basic consumer-goods stocks are catching bids at these levels after lagging the broad market out of the March low. Drug manufacturers like Merck (MRK) and Pfizer (PFE) are in powerful, high-volume up trends. Precious metals and bonds are also doing well. The SPDR Gold Trust ETF (GLD) looks good.

Former high fliers in the financial sector are doing their best impersonation of the tragic story of Icarus, who famously flew too close to the sun out of an abundance of confidence, melted his waxed wings of feather, and fell to his death. The likes of Bank of America (BAC), Suntrust Banks (STI) and US Bancorp (USB) are rapidly giving back the gains made up through the release of the Fed's bank stress test results last week. Since May 7, Bank of America is down 16.7%, Suntrust is down 18%, and US Bancorp has lost 11.6%.

One sector that is clearly demonstrating this reversal is the transportation stocks. From the March 9 closing low through last Friday, the Dow Transportation Average was up 56% compared to a 37% rise in the S&P 500. The outperformance of railroads like CSX (CSX), airlines like Southwest (LUV), and trucking companies like Landstar (LSTR) traditionally acts as a leading indicator of future economic prosperity, since these are the companies on the front lines of the relationship among retailers, manufacturers and suppliers.

As you can see in the chart above, the sector has fallen through the two-month trend line that has supported its rise. This is big. If the move lower is sustained, it could mean the recent optimism over economic green shoots is being replaced by a wave of nausea as people realize the magnitude of the challenges we still face. The consumer remains under pressure. Job losses continue. Export volumes are still falling as America's manufacturing base suffers. Energy prices are on the rise again. And of course, we've yet to find a bottom for the housing market.

Disclosure: The author does not own or control a position in any of the funds or companies mentioned.

Anthony Mirhaydari is a researcher for the Strategic Advantage investment newsletter. He can be contacted at anthony.mirhaydari@live.com. Feel free to comment below.

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Could a bidding war break out over Schering-Plough?

Kim Peterson — Tue, 10 Mar 2009 17:11:00 GMT

Shares of Schering-Plough (SGP) are up 4% Tuesday as investors smell opportunity. Merck (MRK) wants to buy the company for $41 billion, which some think is a little too low.

Perhaps a better bid could come in soon, say, from a certain Johnson & Johnson (JNJ)? Analysts at Credit Suisse think a bid can't be ruled out, although the possibility might only be in the 25% range.

Johnson & Johnson isn't saying anything, but the company is closely watching the discussion because it makes the drug Remicade. Schering-Plough markets Remicade internationally, but loses that golden opportunity if it gets bought out.

Of course, Merck wants to keep the lucrative Remicade deal, so it's trying to dance around the rules by creating a "reverse merger" where Schering-Plough is actually the surviving company. (But -- surprise -- it will be renamed Merck.)

That's just a little too convenient. And Johnson & Johnson probably won't let that happen without a fight. Analysts expect J&J to file a lawsuit soon to take back the marketing rights, or perhaps negotiate a way to buy them back.

If J&J wins back the Remicade rights, Schering-Plough suddenly gets a lot less valuable. And Merck's investors aren't going to like spending $41 billion on a Remicade-less company.

So many questions, and a lot of them hang on Johnson & Johnson. But Schering-Plough is in play, and its share price gains Tuesday reflect that. Merck is up 5% as well in midday trading.

For Merck, it's 'all about the drugs'

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For Merck, it's 'all about the drugs'

Bernhard Warner and Matthew Yeomans — Tue, 10 Mar 2009 10:07:00 GMT

This post comes from partner site The Big Money.

Merger Monday is back. At least for Big Pharma.

Merck (MRK) announced on Monday that it would buy rival Schering-Plough (SGP) for $41.1 billion in cash and stock, a deal the New York Times neatly sums up as being "all about the drugs." Such mega-mergers were to be expected after Pfizer (PFE) stumped up $68 billion to buy Wyeth in January.

"But if Pfizer-Wyeth was driven in part by desperation, analysts said, for Merck the Schering deal may actually be a good opportunity to restock its medicine chest," the newspaper writes. Merck, with several patents expiring, would get access to successful Schering products like the prescription allergy spray Nasonex and to biotechnology drugs in development.

The Wall Street Journal focuses on the rapidly consolidating sector. After the Merck and Pfizer deals, there is also Roche Holding's unsolicited bid for biotechnology pioneer Genentech (DNA) in the works. The roll-ups show Big Pharma is changing strategy away from developing new lines of blockbuster drugs as it did in the 1990s to now bringing in new lines of business, the newspaper writes. BusinessWeek concurs, though in a more critical tone. These mega-mergers may look good for the bottom line, but they are "killers for research," the magazine concludes.

Is Uncle Sam preparing to bail out Citigroup (C) yet again? The WSJ reports this morning that federal banking regulators are indeed keeping a watchful eye on the troubled bank, drawing up fresh contingency plans "to stabilize the bank if its problems mount."

The contingency plans, sketchy as they are, emerged as regulators conduct stress tests on the nation's most vulnerable banks. What could those problems be? With the share price hovering around a buck, there are concerns panicky clients could pull their business from the bank, a situation that, bank officials are quick to point out to the newspaper, is not materializing.

Brace yourself, taxpayer. You may be asked for money yet again to prop up the tottering banks. Sheila C. Bair, chairman of the Federal Deposit Insurance Corp., told the Washington Post yesterday that a government plan to strip toxic assets from the banks' books will be painful at first, but "the painful purge would help restore confidence in the banking system."

And, now the kicker: The effort might require more than the $700 billion Congress approved for the financial industry, but Bair said taxpayers would probably reap an eventual profit on the asset purchases, the newspaper writes. Where have we heard this before?

And just like that, Ford (F) has struck a harmonious accord with its union, the United Auto Workers. Ford's salaried workers ratified on Monday sweeping cuts that cover overtime and unemployment pay, cutbacks in work rules and cost-of-living wage increases, and changes to pension pay.

The agreement puts further pressure on Chrysler and General Motors (GM), which need similar concessions from unions to dramatically cut costs, the WSJ reports. And with just three weeks left to convince the Obama administration that a fresh bailout would be a wise investment, GM and Chrysler on Monday invited the "auto task force" in to kick the tires, the Detroit Free Press writes. The task force was given true red carpet treatment: they test-drove the Chevy Volt, visited a Chrysler truck plant, and had a sit-down with UAW's Ron Gettelfinger, the newspaper says.

We move overseas now, where fresh deflation fears come from Beijing. According to the WSJ, consumer prices in China fell last month for the first time in six years, a worrying signal that the country's economic recovery is stalling.

China's National Bureau of Statistics insists it is too early to be using the d-word, and some economists agree. Still, Reuters points out, China's Commerce Minister Chen Deming and Industry Minister Li Yizhong, speaking at a joint news conference, "both used the word 'grim' to describe the immediate outlook for Chinese exports and the manufacturing sector."

Meanwhile, European Central Bankers struck a more hopeful tone Monday. European Central Bank President Jean-Claude Trichet, citing a modest rebound in corporate-bond markets, told reporters that we're "approaching a moment where we might have a pickup," according to the WSJ. Trichet also took a moment to lecture investors who, he believes, are not putting enough faith into moves by governments to restore financial institutions and restore the credit markets.

And, finally, Google's (GOOG) YouTube is in a fresh copyright dispute in which it says it is being forced to pull music videos from the popular video-sharing site. The latest legal scrap is in the United Kingdom, where the Financial Times reports Google abruptly blocked the music videos after it failed to agree on a new royalties deal with collections body PRS for Music. But this time there's a twist. The collections body is complaining the loudest that the videos are no longer accessible on YouTube, saying they are "shocked and disappointed" at Google's actions.

This post was written by Bernhard Warner of The Big Money.

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Merck and Schering-Plough? Big Pharma running scared

Kim Peterson — Mon, 09 Mar 2009 18:29:00 GMT

Big Pharma is running scared.

That message is coming across loud and clear, now that Merck (MRK) is buying Schering-Plough (SGP) for $41.1 billion in cash and stock. It was just a few weeks ago that Pfizer (PFE) hooked up with Wyeth in a $68 billion deal. And then there's Roche's current offer for Genentech (DNA).

Drug companies are rushing into each other's arms these days to unite against some difficult years ahead for the industry. The credit markets are dried up and the political and economic landscape is changing. The mergers are a defensive move as companies find their bottom lines increasingly under assault.

Here are some of the problems drug companies face:

1. Patents expiring. Companies need to find replacements as their drugs lose patent protection. Merck's asthma drug, for example, loses its patent in the next few years, according to The Economist. By buying Schering-Plough, Merck will double (to 18) its number of late-stage development drugs.

2. Obtaining financing. Yes, even well-established pharmaceutical companies are struggling with finding new capital and restructuring debt.

3. Costs are too high. Consolidation allows drug companies to lay off more employees and keep costs in control. Merck is expecting to cut 15% of the positions in the combined company.

4. Sluggish sales. Generics have been killing sales of drugs like Fosamax and Zocor for Merck. And cash-strapped consumers are cutting back on spending, even when it comes to their own prescriptions. Analysts have been pressuring Merck to do a major deal in response to falling sales, according to The Associated Press.

5. Political pressure. We're still unsure where President Barack Obama's administration is headed in terms of health care, but drug companies may be pressured to offer bigger discounts, according to The Economist.

Mergers are an easy option in times like these, particularly because valuations are so cheap. They don't fix everythng, but they address short-term problems and, in this economy, just surviving the next few years is what's important.

Merck investors weren't exactly rejoicing over the news today. Shares were down nearly 8%, while Schering-Plough shares were up about 10%.

Schering-Plough wins fans after earnings report

The 10 'Dogs of the Dow' for 2009

Schering-Plough wins fans after earnings report

Kim Peterson — Thu, 05 Feb 2009 20:20:00 GMT

Schering-Plough (SGP) is getting some nice buzz this week after posting fourth-quarter results that were better than many expected.

Schering and Merck (MRK) give their reports on the same day, since they have shared cholesterol treatments, but this time around Schering was the star of the show. Schering's profit was ahead of analyst targets, and its revenue rose 17%, even after unfavorable currency rates sliced off 6%.

That's led to speculation that Schering could be the next big takeover target in the pharmaceutical industry, according to Reuters. Schering would be a fairly easy acquisition to make, and it has an added advantage because none of its big products will be undercut by generic knockoffs anytime soon.

Credit Suisse swooned after the earnings news came out, saying they "revealed evidence of strong execution." Yes, revenues were about 5% less than had been expected, but expenses fell by 10%. "We see SGP as a 'best in breed' story," analysts wrote.

And The Motley Fool likes Schering better than Merck. Schering is about half the size of Merck, but has a deeper pipeline of drugs and only lags Merck by about 23% in revenue, writes Brian Orelli. Merck has some underperforming drugs, particularly its Gardasil cervical cancer vaccine.

Schering and Merck are both cutting costs wherever they can in this recession, and have announced layoffs and other moves. The cuts will likely help make Schering a more valuable acquisition target, and perhaps those chances are strengthened further by Pfizer's $68 billion deal to buy Wyeth.

Schering's share price is nearly where it was a year ago, after dropping below $14 last October. Shares closed at $19.54 Thursday. This stock has some serious momentum right now.

Related reading:

Pfizer, Wyeth signal a rebirth of M&A

Silver lining: Merck looking very healthy

Pfizer: Merging to fire people