Stocks to Watch 2016 Valeant Pharmaceuticals nyse:VRX Sobeys tse:EMP.A undervalued

Valeant Pharmaceuticals nyse VRX

Although the specifics regarding Valeant's problems won't be aired out until the company releases it's 10-k annual report in April of 2016, it's safe to say the stock has borne the full brunt of investor scrutiny (high institutional ownership has been a factor).  The biggest risks here on out are revenue growth, write-offs, and lawsuits - but even in a worst case scenario there is no way these three will severely impair earnings for two or more quarters.  Valeant continues to own a number of game changing drugs and products - a non-ownership relationship with Philidor doesn't change that !

revenue stream remains strong this will be key in keeping operating costs per unit within reasonable levels.

- xifaxan is approved
- diversity of portfolio
- global exposure - problems in the USA do not affect Valeant's ability to affect/control prices in other countries.
- sales in China since 2013
- ranks high among diversified companies

Sobeys tsx:EMP.A

The large quarterly write-off related to the Safeway assets should be seen as a one time occurrence; the affect on future earnings is being exaggerated.  This makes it a stock to watch in the second half of the year.

A recovery in the price of oil (will average $45 this year and $72 in 2017) will be a boost to Alberta's economy - big Canadian companies have been able to withstand volatility more than shale companies south of the border/rig count down in USA = less oil glut in North America = more opportunity for Canadian oil price to close gap with WTI.  Since acquiring Safeway, Sobeys has been the number one grocery chain in Alberta.  For the first three months of 2016 calendar year same store sales +0.4% chain-wide despite being up +2.7% in its base of eastern Canada.  2016 has thus far been an extremely volatile time for Alberta's economy (keystone pipeline rejection/oil price dropped to historic low/oil companies slashed capital spending); it is likely that the situation will improve later on this year and into next year.

• price/earnings ratio greatly undervalued versus alternative stocks Loblaw Companies, Metro Inc.

• book value per share is at a discount.

Royal Bank of Scotland Group plc

Since coming off one of its worst earnings quarters in the bank's history the stock is off 30%.  The write-offs which hampered the stock last year will become less of a burden in the future thanks to

• time deadline for claims related to mis-selling scandal (risky loans, payment protection insurance in US) now almost a decade old

• 1.5 billion pounds of the latest write-down relate to a settlement with the US Federal Housing Agency for mis-selling of mortgage backed securities

so expect these write-downs to become smaller over the next 1-2 years which will allow the bank to return to profitability - and perhaps even start paying a dividend.

Risk is not a major factor - the bank is 73% backed by the British government.

Greek Companies To Invest In national bank of greece nyse NBG OPAP rebound stocks

Greece securing new bailout money stabilizes an economy that was free falling for the better part of 2015.  That creates investment opportunities - at least until September 2016 when all of the current deals expire.

Greek bank stocks stand to benefit from recent developments. August 29 - Greece National Bank Shareholders Approve Recapitalization Plan;  August 11 - The New York Stock Exchange NYSE notified the bank that it must bring its market price back above $1.00 by February 2016.

National Bank of Greece has the most upside but don't ignore the risks
- in 2008 TT Hellenic Postbank aka Greek Postal Savings Bank was one of the world's 2000 largest companies - in 2013 it was forced into liquidation.

Motor Oil Hellas (FRA:MHZ)

- best performing Greek stock since 2012 (price: 3.80->9.0)
- since 2008 is the only 'new' Greece-based company added to the Forbes Global 2000 list.
- least risky of Greece's eight major companies (five are banks most of which were on the verge of collapsing on the eve of the last bailout deal).
- oil refineries stand to benefit from low oil prices (takes months if not years for gas pump prices to reflect lower oil price).  crack spread remains stable.

OPAP SA Greek Organization Football OTCMKTS:GOFPY

gaming stocks

- weathered the global financial collapse in 2007/2008 fairly well (ranked 1009 on the Forbes Global 2000 list in 2008 before eventually falling out).
- worst performing major Greek company stock since new bailout package announced (end of June price: 3.5 -> 4.5 August 14 -> 3.75 August 31)
- Greeks voted to stay in the EU - that benefits the tourism industry which OPAP business is tied to.

National Bank of Greece NYSE:NBG

guaranteed access to EU taxpayers money when facing collapse, bank bailout

yes, this is a very risky investment but the reward could be substantial.  The bank's market capitalization has been cut in half over the last 12 months ($4.2 billion -> $2.1 billion).  Despite ongoing financial problems in Greece, between 2010 to 2013 the stock price spent most of the time oscillating between $25 and $35;  It's now at 67 cents.
Keep in mind this has always been Greece's largest company - that takes away a bit of the risk since even in dire circumstances this is one of the first companies that the government will step in to support.  Consider it Greece's version of a bank that's too big to fail.

- revenue is about the same as Greece's #2 and #3 banks combined
- since 2008 Forbes has routinely called it Greece's top company
- despite new bailout money stock price continued to plummet - to me this is a result of a wait-and-see approach by investors; institutional ownership only 3%.
- End of August: new European Union rule tied to the new Greece deal gives greater economic flexibility to Greece allows it to tap into additional EU funds in order to bailout the most important banks - even going as far as to consider tapping into taxpayer funds from throughout the EU.

Another reason to expect a rebound in the stock price:
The NYSE requirement that ADS share prices of stocks listed at the exchange be above $1.00.  NYSE is threatening to delist the stock unless the company gets the price back up from $0.67 to to $1 (it has six months to do this - expiry date is February 11, 2016).

Israeli & Canadian Pharmaceutical Companies Leapfrog their way to the top Teva, Valeant VRX game changing drugs ms

Attention investors: take a long hard look at Teva Pharmaceutical Industries of Jerusalem and Valeant Pharmaceutricals of Montreal - you won't regret it !

Just last week nyse:TEVA paid $40.4 billion for Allergan's nyse:AGN generic drug business giving the world's largest generic drug maker an even bigger international presence (Allergan was/is present in more than 100 countries).

This also gives them more leverage because more revenue spreads fixed costs over more units of output - which is important in the business of low margin generic drugs.

Though ms drug Copaxone faces increased competition from Novartis and Momenta among others, their proprietary brand continues to grow (last quarter both in terms of sales +12% = 50% of company profit and about a fifth of company revenue) and share of the market for MS prescriptions (31%) - thanks in part to more innovative ways of introducing the drug to patients (3X a week 40mg version vs 6X by competing brands).  And don't forget about the over-the-counter products - Teva has hugely benefited from key partnerships with companies like Proctor and Gamble and even Canada's Life brand (Shoppers Drug Mart).  For instance in Canada products include sea salt for baths.

Another overlooked aspect of the company - it is deeply rooted in Israel and has strong connections with Israeli universities - this is key since these institutions are credited with having developed important drugs such as Copaxone and Azilect.

Financials - Teva was doing well even before taking into considering recent acquisitions - in GAAP terms operating income and net income more than doubled last year despite revenue being stable.  All major metrics have been stable since 2010 with non GAAP earnings per share up steadily : 4.54 in 2010, 4.97 in 2011, 5.01 in 2013 to 5.14 in 2014.

Teva - making Israel proud : The deal for Allergan is the biggest in Israel's corporate history !

Valeant Pharmaceuticals nyse: VRX - merging its way to the top one company at a time - acquiring game changing drugs

According to CEO Mike Pearson, Valeant remains focused on medium sized acquisitions - this, despite the fact that the more recent deals have been game changing (Salix Pharmaceuticals ltd for $10.1 billion) and the tug-of-war for control of privately held botox maker Allergan plc.

July 2015 - Just this month Valeant took control of one of Egypt's leading drugmakers Amoun Pharmaceutical by taking over parent company Mercury Holdings ($800 million deal).

Magna International (MGA) Reaches Record High On Sales, Gold Companies Get Leaner and BlackBerry's Survival (Fairfax FFH)

       A lot has happened since my last post not the least of which is news of BlackBerry's (bbry) disappointing quarter.  Although I'm confident the company will survive as a private entity within Fairfax Financial (aka the Berkshire Hathaway of Canada), as an investor you have to be frustrated with the way things turned out - BlackBerry has already inked a $4.7 billion buyout deal with Fairfax (ffh) which already owns 10% of shares - at $9 a share the offer gives shareholders almost no return for the tech maker's bes, qnx and consumer handset division :  7500 patents alone are estimated to be worth between $1b and $2 billion, then there's the company's $2.82 billion cash on hand (up $800m from a year ago).  In fact BlackBerry's 2500 security-related patents could form the cornerstone of a new secure enterprise company.

As an investor the deal doesn't make sense, but as a Canadian I'm content with it.  You see, Toronto-based Fairfax is headed by Prem Watsa who is a big supporter of Canada's tech industry (1800 technology firms present in Waterloo and Ottawa, Ontario is North America's 3rd largest tech hub after California and Texas).  If there's any company out there that will give BlackBerry a decent chance to survive intact it's Fairfax (taking company private means it won't be broken up).
Personally, I feel as though BlackBerry can still make it the market - the billion dollar quarterly loss-writedown was blamed squarely on unsold z10 phones, the same phone that holds the distinction of being the company's highest priced device (profit from one phone as much as 3X as much as Nokia Lumia).  The corporate market didn't mind paying more (German government and Nato bought it) but many other consumers didn't -  From the reviews I've read and those of my peers, it's obvious the problem with the phone was the high price not the device !  At times last year even Apple blamed slower sales on the price of its phones.

The good news :  BlackBerry has since launched cheaper devices (q5, z30) and a high-end device with touch pad catering to traditional blackberry lovers (q10).  When BlackBerry gets the price right, the phones will sell.  Blackberry Enterprise Server remains in a league of its own, the company's devices continue to receive rave reviews, market share similar to Windows OS which heavyweight Microsoft remains committed to (paid $7b for Nokia handset division).  How much longer can BlackBerry rely on the corporate market ?  by 2016 38% of companies are expected to stop providing mobile devices to staff.

Techstocks continue to shine !   Interbrand just released its annual ranking of the world's most valuable brands and technology companies took four out of the top five spots including, for the first time the top position:  #1 Apple ($98.3b +28%), #2 Google, #4 IBM and #5 Microsoft.  The next highest ranked tech company Samsung also moved up, to #8 from #9 last year.  Microsoft's recent acquisition Nokia was the worst performer, falling to #19 from #57.

Auto parts supplier Magna International is red hot!  

Though last quarter dividends per share didn't change from three months prior, sales (+16%) and earnings (+19%) were up by a healthy margin.  Not unsurprising given that, US auto sales rose at a torrid pace last summer (annualized rate for August was 16 million up 20% the strongest in six years).  Auto sales expected to slow to 1.15 million units this month (at GM only by a couple percentage points; GM is one of Magna's biggest customers); but a big reason for that is fewer selling days.  Ford also one of Magna's most important customers, reported a sales increase of 12% in August.  Last year, Ford awarded one of Magna's car plants in Brazil with a silver award for its 'superior quality, delivery and cost performance".

Since 2009 Magna has also been a key partner of Ford's electric vehicle division, it was in 2011 that Magna began assembling electric and hybrid vehicles for Ford (notable since this year 2013 Ford is on track to break its own sales record for hybrid vehicles of 35,500 reached in 2010).  Ford's August year-to-date auto sales totaled 221,270 +17.5%.

Barrick Gold Gets Leaner

With gold prices testing the $1300 level gold companies are being forced to adjust accordingly - gross production cost which includes expenses associated with exploration must be reduced so that companies can maintain healthy profits (investors have been shown to punish companies when earnings drop - they seem oblivious to the fact that a 20-30% drop in the gold price is going to make it next to impossible to avoid a quarterly earnings drop).  Barrick Gold has responded to this pressue by selling high cost operations;  Last summer it was the 3 Australian mines that comprise Yilgarn South (1h2013 196,000 ounces at a cash cost of $1145/oz), sold for a combined $300 million.  Then this month, the company announced its intention to sell two more mines for $100 million.  This would put Barrick Gold halfway through its ongoing plan to sell or lower output at 12 of its 27 mines.