Dr Reddys Laboratories (RDY)
By
Timothy Lutts, Chief Investment Strategist and Editor of
Cabot Stock of the Month ReportFrom Cabot Wealth Advisory, 11/2/09. Sign up for free
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Dr. Reddy's Laboratories (RDY): Profit From Industry Cost Controls
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.
Dr. Reddy's Laboratories (RDY)
7-1-27 Greenlands
Ameerpet
Hyderabad, 500016
India
Phone: 91 40 2373 1946
Fax: 91 40 2373 1955
Web Site: http://www.drreddys.com
Details:
Index Membership: N/A
Sector: Healthcare
Industry: Drug Manufacturers - Other
Full Time Employees: 11,228
Timothy Lutts
President, Chief Investment Strategist, Editor of Cabot Stock of the Month Report
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 Report.