Tag Archives: Health-care

M&A continues

All sectors was in a red territory yesterday, but only one of them was up. The biggest loser was energy and the winner was the heath care sector. So far in 2014, the biggest loser is the energy sector, while the health care sector is the winner. This is just what I expected it to be in 2014. Read my article titled; health-care bull, dated January 8, 2014.

The takeover boom is not over yet, and 2014 will be the best in many years. Lawyers working with advice on takeovers say they`ve got a robust pipeline of deals in the works. Some of their works is delayed, so December will be busier than usual.

Health care stocks soared in 2014 and next year is shaping up to be another great year for these stocks.

The shares of Cubist Pharmaceuticals Inc rose 35% yesterday, and the reason is that pharmaceutical giant Merck (MRK) want to acquire its smaller peer for $102 per share. Included the debt, the deal is valued at $8,4 billion. This deal will strengthen Merck`s leadership position in the hospital acute care market.

Two of Cubist Pharmaceutical`s three commercial products focus on treating difficult-to-fight infections, and the firm`s reputation has become a «superbug» specialist in a business that has overlooked such infections until fairly recently.

The deal will be financed primarily by the issuance of about $9,5 billion in new debt, and Merck expect the deal to add about $1 billion in annual revenue. Cubist Pharmaceutical`s drugs should become significantly accretive to Merck`s EPS from 2016.

I wrote about M&A activity last year. Read my article titled M&A (merger and acquisition), December 13, 2013. First of all; it is very lucrative for companies to buy now when the interest rates are historically low, and I think this will continue until the Fed makes a jump on the interest rate.

If you look at 2013, the S&P 500 was up about 30%, and that was a good sign of a healthy stock market. Credit markets was also good with higher leverage levels. About 18,000 Private Equity Firms were also looking for liquidity given strong prevailing market conditions, in addition to increased corporate cash and finite-lived private equity capital reserves. All this factors have led to high degree of M&A activity in 2014, but what about 2015?

Predicting the future is risky business, but what are you gonna do if you don`t belive in something?

By tracking global sell-side mandates and deals reaching the due-dilligence phase of a transaction, it is possible to forecast future deal levels. If you look at the deal volume reported by Thomson Reuters, you can indicate future changes in the numbers of announced M&A transactions.

The latest Q3 data this year will forecast Q1 2015, and that suggests sustained momentum in M&A activity through 2015. Deal volume is expected to go up, and hot sectors will be entertainment, media, consumer, manufacturing and telecommunication. The most active sectors are expected to be energy and technology.

A forecast is based on facts today, but as you may know everything can change tomorrow. A change in macroeconomic or political conditions or even a change in the financial markets will change the whole picture and that can happen overnight.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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OPEC meeting in Vienna on thursday

OPEC is having a very important meeting on thursday and that can move the oil markets. The 12-member group is bickering over who should cut oil output, and by how much in order to pump up the prices. The meeting in Vienna is the groups most watched session in many years.

gspen

The U.S oil shale revolution is a game changer. (Read my article titled; American shale revolution – from January 27, 2014). The oil supply have increased and the oil prices is declining, and that have opened up the market. Countries that once had to submit to OPEC`s prices can now look for other suppliers. The oil king is about to lose.

China has for a long time been at the mercy of OPEC for twenty years, and the economic giant imports about 7 million barrels of oil per day, while the U.S imports about 8 million barrels of oil per day.

China`s demand for oil will continue to increase as its population is growing and so are the demand for oil-related items such as cars, plane traffic and motorcycles. As the U.S oil shale production makes the country more self-reliant, China has become more important to OPEC.

OPEC has a monopoly on the market and China pay about 10% more for the oil than the market price. As the oil prices plunge, many other suppliers in other countries will vie to undercut that monopoly. OPEC is slowly losing its second biggest customer as China now can pursue oil from countries outside of OPEC such as Brazil, Venezuela, Colombia and some countries in Africa.

This is just the beginning. China bought a lot of oil from Colombia this year, and China Petroleum and Chemical Corp (SNP) processed oil from Brazil`s Ostra field for the first time earlier this year. OPEC`s shipment to China fell 11% and the average cost per barrel was 10% lower.

China`s oil production and oil refining companies will benefit from the changing import sources. They`re already bumping up their refining capacity and shooting for a 20% increase in the next 5 years, and there`s a little doubt that China will purchase more crude oil from Russia as the West deepens their economic sanctions. The sanctions on Russia have led to increase China`s purchases from its communist brethren by about 60% in September.

WTIC

The energy sector is the worst performing sector in the S&P 500 this year, but the shift started years ago, so what we see today should not be a surprise for some one. It started in 2008 when Crude oil peaked at $147 a barrel, but the oil price have plummeted to about $73 a barrel now.

The energy sector has been the leading sector since 2000, but today its the worst performing sector beaten by the health care sector. I talked about the health care sector at the beginning of this year and I said I expected that sector to be a great investment opportunity.

Read my article from January 8, 2014, titled; Health-care bull. I told you to keep an eye on the health-care sector. I also said that the oil price is a risky bet, and that the oil price can plunge and Opec can face huge problems.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Health-care bull

The stock indices are up and the fear goes down. Vix is down 4,7%, trading at 12,92. People are bullish and now it is time for the companies to deliver. The sentiment is still very high, so it will be interesting to see the companies economical numbers and their earnings growth.

2013 was an extremely good year in the stock market, but I don`t think 2014 is going to be the same. We did not see a big correction last year. It all went up. But this year will probably be different. It is headed for some corrections and this year will be more volatile than last year.

Three rounds of QE have helped the indices to increase and reach a new all time high. The S&P 500 is up 173% from its twelve-year low in 2009. Janet Yellen will replace Ben Bernanke as a FED chairman on Jan 31. Janet Yellen won Senate confirmation (56-26 votes) to become the 15th chairman of the FED.

The Nasdaq Biotechnology Index is up 1,4%. Health-care shares in the S&P 500 is up 0,3% in 2014, and this is the most among the ten main industries. Investors are waiting for the Fed minutes today, and news about the job report on friday. This is important news that can drive the market.

Today, we will know what outgoing Fed Chairman Ben Bernanke really want to do with the gradual tapering of $10 billion a month. Today`s minutes will tell us that this was a narrower view to some few FOMC members or not.

Follow the oil price now. This is a risky bet. The oil price can plunge and Opec can face huge problems. If this is the scenario, I think it will be very good news for the U.S consumers. Who want cheaper gasoline?

Middle East is the key and U.S Secretary of State John Kerry are working with difficult cases like Shia-dominated government in Baghdad, the Islamic State in Iraq and al Sham (ISIS), Al Qaeda’s fast-growing franchise operating in Syria, Sunni groups marginalized by Iraqi Prime Minister Nouri al Maliki’s authoritarian policies, Egypt, Tunisia and energy producers like Nigeria, Venezuela and Russia.

I mention this because it all affects the oil price, and what`s happend in this areas can change the game very fast. This is a big risk in 2014. So, the happenings can drive the oil prices up or down. It depends on whats happening?

The unemployment data from EU yesterday was disappointing. In Italy the unemployment rate is at the all-time high of 12,6% (for November), and for the broader EU unemployment, the rate is now at 12,1%. Just below its record 12,2%. The unemployment rate is U.S is just above 7%.

It looked like we had a game changer in November – December last year, but take a look at the chart below. CRB have turned around and are still declining. It is below 50 MA and I will wait for this to turn up again.

New today: ADP Non-Farm Employment Change at 8:15am, Crude Oil Inventories at 10:30am, 10 Year Note Auction at 1:01pm, FOMC Meeting Minutes at 2:00pm.

CRB 07012014

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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