Shares of generic drug manufacturer Mylan has become very attractive, especially after today's overdone selloff.
While the company has some hurdles legally (what drug company doesn't?) and has some internal housekeeping to tend to, the shares are becoming too cheap to pass up. At the time of writing, shares are trading at $23.30, down about 17% on the heals of it's latest earnings report. I don't believe this sort of selling is warranted but it gives value investors an attractive entry point to begin accumulating shares.
It's blown thru supports, such as the 61.8% retracement (dark blue line) of a multi-year climb higher and some previous major resistance-turned-support levels (white dashed lines), which I've left on the chart for reference. The recent bounce gave some extensions to use, but today's selloff has pushed shares right past the first one, the 127.2% extension at $24.39. The next extension, the 141.4% at $21.75, is interesting because it coincides closely with the 78.6% retracement of the aforementioned multi-year swing higher at $20.63. Should those fail, we have one last extension to target, the 161.8% extension at $17.95.
In essence, I'm buying a starter position today and will be adding if it dips to the lower levels, which really should be viewed as a major support zone between $18 and $21.
With so many patents expiring for blockbuster drugs, Mylan will soon be able to pump out cheaper generics of them and they have an excellent track record of cranking out pills that are in demand.
It'll be important to watch the headlines on this one, as there are legitimate concerns, but with P/E's at 5.3x next years estimates and 5.0x 2020 estimates, this is just too cheap to ignore.
Be sure to have a game plan, including a stop loss appropriate to your risk tolerance (say, a back-to-back weekly close below $17.95, or a percentage you're comfortable with like -10%).
Once I see some sustained uptrend taking place, or a major change in my thesis, I'll let you know! Until then, happy trading!
While the company has some hurdles legally (what drug company doesn't?) and has some internal housekeeping to tend to, the shares are becoming too cheap to pass up. At the time of writing, shares are trading at $23.30, down about 17% on the heals of it's latest earnings report. I don't believe this sort of selling is warranted but it gives value investors an attractive entry point to begin accumulating shares.
It's blown thru supports, such as the 61.8% retracement (dark blue line) of a multi-year climb higher and some previous major resistance-turned-support levels (white dashed lines), which I've left on the chart for reference. The recent bounce gave some extensions to use, but today's selloff has pushed shares right past the first one, the 127.2% extension at $24.39. The next extension, the 141.4% at $21.75, is interesting because it coincides closely with the 78.6% retracement of the aforementioned multi-year swing higher at $20.63. Should those fail, we have one last extension to target, the 161.8% extension at $17.95.
In essence, I'm buying a starter position today and will be adding if it dips to the lower levels, which really should be viewed as a major support zone between $18 and $21.
With so many patents expiring for blockbuster drugs, Mylan will soon be able to pump out cheaper generics of them and they have an excellent track record of cranking out pills that are in demand.
It'll be important to watch the headlines on this one, as there are legitimate concerns, but with P/E's at 5.3x next years estimates and 5.0x 2020 estimates, this is just too cheap to ignore.
Be sure to have a game plan, including a stop loss appropriate to your risk tolerance (say, a back-to-back weekly close below $17.95, or a percentage you're comfortable with like -10%).
Once I see some sustained uptrend taking place, or a major change in my thesis, I'll let you know! Until then, happy trading!