By Elyse Andrews, Editor of Cabot Wealth Advisory
From Cabot Wealth Advisory 12/11/10 Sign up for free Cabot Wealth Advisory e-newsletter
A common request from Cabot Wealth Advisory subscribers is for Indian stocks that are likely to do well in future.
Cabot China & Emerging Markets Report, written by Editor Paul Goodwin, is where you’ll find the top stocks from the BRIC (Brazil, Russia, China and India) countries. Paul recommended Indian company Dr. Reddy’s Laboratories (RDY) in November, writing this:
“Dr. Reddy’s still gets 69% of revenues from the sale of generic drugs. But the company is also a contract manufacturer of active pharmaceutical ingredients, finished dosing forms and biotechnology products for other pharmaceutical concerns. And a program of original research into potential treatments for cancer, diabetes, cardiovascular disease, inflammation and bacterial infection has produced a strong pipeline of drugs in clinical trials.
“Dr. Reddy’s Labs has over 40 families of products in distribution in the U.S., and 69 Abbreviated New Drug Applications (ANDAs, which are requests for approval of generic drugs) in submission to the U.S. Food and Drug Administration. Of these applications, 32 are “Paragraph 4” filings (claims that products do not infringe on patents or that the patents are not enforceable) and 19 are “first-time filings.” Outside India, the company also has strong generic drug market positions in Russia, the U.K and Germany.
“While Dr. Reddy’s gets only 2% of revenue from sales of its own proprietary products, the company has used both internal resources and outside acquisitions to increase its original research capability, as well as its generic manufacturing capacity. In 2005, the company bought Roche’s custom pharmaceutical services business for $62 million. And in March 2006, the company sealed its acquisition of Betapharm, the fourth-largest generic drug manufacturer in Germany, and with it Betapharm’s portfolio of over 145 products. A partnership with Argenta Discovery is aimed at development and commercialization of a new treatment for chronic obstructive pulmonary disease.
“The earnings line for Dr. Reddy’s Labs has been improving rapidly with an estimate-beating 41% jump in Q3 earnings reported on October 23. This quarterly report also showed an 8% gain in revenues and a 15.3% after tax profit margin that was the highest in years. Estimates for the full fiscal 2011, which ends in March, are for $1.44 per share, up 251% from the prior year.
“The long-term chart for RDY shows a stock that spent all of 2006 and 2007 and part of 2008 trading sideways in a tight range in the teens, which is appropriate for a steady state company. But after the big correction in 2008, the stock blasted off from its low of 7 and hasn’t made a major correction since. The portfolio owned the stock earlier this year, but got shaken out last July. The move that began with the stock blasting off from its double bottom at 28 in August pushed RDY to 40 before a little weakness showed up. We think you can buy RDY right here. BUY.”
And the stock is still recommended buy. To find out more about RDY and other top emerging markets stocks, click here.
Elyse Andrews
Editor of
Cabot Wealth Advisory
Elyse Andrews edits Cabot Wealth Advisory, a free email newsletter that offers independent, no-nonsense investment advice on how to build long-lasting wealth written by Cabot's analysts and editors. Every Saturday, Elyse writes the Weekend Digest, which includes her column and a summary of Cabot Wealth Advisories that readers may have missed during the week. Elyse is also a regular contributor to The Iconoclast Investor, a blog for Cabot editors and readers to share their views and interact with each other.
By Timothy Lutts, Chief Investment Strategist and Editor of Cabot Stock of the Month Report
From Cabot Wealth Advisory, 11/2/09. Sign up for free Cabot Wealth Advisory e-newsletter
Last Friday, while the Dow was dropping 250 points, I took a look at the new highs list. I found 34 stocks, many of them too illiquid and some too stodgy, but one in particular that interests me.
It's Dr. Reddy's Laboratories (RDY), a major Indian pharmaceutical maker whose biggest market is the U.S., which accounts for 35% of revenues. After that comes Western Europe with 26%, India with 17%, Russia and Eastern Europe with 11% and others with 11%.
This is not a hot stock; it's too big and too mature to be a fast grower. But I think Dr. Reddy's focus on generic drugs, which account for 72% of revenues, will pay off big in the years ahead as the health care business pays more attention to cost control. And I think the company's established connections all over Europe and Russia will bring rewards, too. Ideally, it will get more business in China and other Asian countries, but that will be a harder sell.
The stock earned an appearance in Cabot Top Ten Report back on September 28, when it was trading at 20, and here's some of what editor Michael Cintolo wrote.
"The big potential here comes from a very long launching pad. RDY peaked at 19 in April 2006, and was stopped there again in 2007 and 2008. It bottomed at 7 in the bear market, and then climbed back up to 17, where it built a tidy little base. But it blasted out of that base two weeks ago, and walked right through the old resistance level of 19, so now there's no upside limit to its potential. The buyers are in complete control. You could join them now ... or wait for a pullback."
At the time, Mike recommended buying between 18 and 21, and there have been plenty of opportunities to do that over the past month. But last Thursday the stock broke out to a new high, and then on Friday, as I was conducting my search, it ran higher still.
Technically, you could buy it here; the chart is positive. But ideally, you'll want to wait for a lower-risk entry point, particularly since the broad market is now less supportive.
Timothy Lutts
President, Chief Investment Strategist, Editor of Cabot Stock of the Month
Timothy Lutts heads one of America’s most respected independent investment advisory services, publishing eight newsletters to more than 165,000 subscribers around the world. Tim leads a dedicated team of professionals who serve individual investors with high-quality investment advice based on time-tested Cabot systems. Under his leadership, Cabot has been honored numerous times by both Timer Digest and the Hulbert Financial Digest as among the top investment newsletters in the industry. Tim also edits Cabot Stock of the Month.