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STOCK REVIEW (ABBV)

ABBV reported earnings and beat estimates, however, the sales of Humira disappointed, according to Wall Street.

It is not easy to satisfy Wall Street young analysts, many of them so young that they even haven’t experienced 2008 recession, some old that they see doom and gloom at every corner.

All they do is that they take old numbers from previous earnings and sales, extrapolate them into the future (meaning next quarter), and then are disappointed when the company miss their extrapolation or overly cheering when the company exceeds their extrapolation.

So Humira disappointed Wall Street extrapolations and the stock sold off 5% on Friday. Should we be worried?

The price action, it all started with Citron.

Weekly Results

I remember Citron shorting ABBV twice in the last ten years (they may have done that more but two noticeable shorts I still remember) the last one happened in 2015. It was a great opportunity. They tanked the stock from $70 down to $50. We went to $120 since then.

Even with Humira patent risks, the managers are not idiots and they hedge. ABBV was around for 150 years (as a part of ABT and spun off in 2013). So, if you think ABBV is at the end of their life, going bankrupt, then sell, run, scream, and go hiding. I am buying.

A quick note, people had similar talks about JNJ a few years ago when JNJ had a massive recall of one of their product. People predicted end of JNJ, spinoffs, and bankruptcy. The stock tanked from 80’s to 40’s… I still hold shares I purchased back then.

ABBV kept sliding down on Citron short call and all sorts of Humira patent news. History repeats itself. We witnessed this behavior twice in the past.

Small investors are in panic mode and selling while I bet Citron is buying.

I see this selling as a good buy opportunity. We added a few more shares of ABBV to our portfolio.

ABBV is a wild ride so ignore all noise and follow the company’s fundamentals rather than news. At this level, the stock pays over 4% dividend.

 
BTO 7 ABBV @ 86.90
 

Later during the week the stock dropped below $90 a share sharply.

This posed another great buy opportunity. We bought a few shares adding to our existing position:

 
BTO 7 ABBV @ 89.20
 

As soon as we purchased more shares at $89.20 the stock briefly dropped to $87.76 but then recovered back above $90 a share.

The $90 a share is a strong support level and it needs to hold for the stock not to fall further. It seems the level is holding as of now.

After earnings 5% drop the stock recovered some losses and we expect more recovery to come next week





2 responses to “STOCK REVIEW (ABBV)”

  1. HS –

    Nice article and it comes down to fundamentals. IF they are sound fundamentally and the herd is running away – huge buying opportunity. At over 4% yield, in an increasing interest rate environment, I like it. Congrats on the purchase and mini analysis on the support levels.

    -Lanny

    • Martin says:

      Thanks Lanny, I agree that this was a great buying opportunity. Already up 11% and 8% on those purchases plus locked in a nice >4% yield…

      Thanks for stopping by.

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