MYL - Mylan Laboratories Update

I just want to take this opportunity to boast while I have the chance (before the DOW crashes to less than 10k, as I heard one fellow say today). If you had bought Mylan on Thursday, August 16, when I picked it at 14.05, you would have gained nearly 11% as the stock closed at 15.58 today, just two business days later. Further, I think the stock is STILL a buy, with a PEG of just 0.71. I think this stock is still going to go higher. I would unload it when it hits 17.50 or so, just because you'll be closing in on 25%, and if you won't take your gains at 25%, your being greedy...especially considering that the stock has already gained 11%, a pretty decent gain in its own right.



I will be breaking down JPM next time I have a chance. I know all the pros are shorting financials right now, but we'll see how the fundamentals look and go from there.



In other news, the Cards beat the Cubbies today, keeping themselves in the hunt for the division title. Ankiel went yard.

Google vs. Yahoo!

One share of Google costs just over $500.00 (as of Friday's close). I thought I would try to compare Google and Yahoo! to see which is the most expensive based on the conclusion of Friday's trading. Now, I don't contend to be the first person to compare these two stocks...they are companies in almost the exact same business...but this is an up to date comparison of the two stocks.

First I would like to say that both companies make their money on internet advertising. It's impossible to predict how the world will change, but as of right now, I think most people would say that internet advertising is a growing business. Google and Yahoo! are by no means alone in this business, Microsoft is in the fray with MSN, and several other companies are in the mix as well, but Google and Yahoo! have by far the largest market share.

Obviously we can't value one stock over another based on economic factors because they are in the same sector, and do almost the exact same business.

Based on past performance, there has been a lot of question as to how much more Google can grow. The stock is, after all, at $500.00. But it also looked expensive at $200.00, at $300.00, and so on. It has consistently just gone up. Google is currently trading at 40.63 earnings. Of course, it doesn't matter what Google is worth today, but what it will be worth going forward. Google has a forward P/E of 25.63. Its PEG is less than one (0.96)! Because companies are valued based on their expected growth, this is the most important statistic. Of course, analyst could upgrade or downgrade the stock, which would raise or lower it's value.

Amazingly, Google has about 18.5B in total assets versus about 1.5B in debt! Interesting however, is Google's cash flow statement, which seems to say that although Google brought in about 3.5B in operating activities, and another 3.0B in financing activities, but they seem to have lost about 6B in investments if I am reading their page correctly. This isn't particularly alarming, just because the company seems to have such a high net worth.

Yahoo! closed at $23.54 (Friday again). That's quite a difference in the price of shares, isn't it? Despite it's inexpensive seeming share price, Yahoo! does not look to be in nearly as good of shape as Google. Yahoo! has a forward P/E ration of 41.30 and a PEG of 2.24. As a general rule, anything over 2 should usually be sold. This alone tells us that Yahoo! is considerably more expensive than Google. Yahoo! has about 11.5B in total assets, versus about 2B in debt.

So let's get this straight, Yahoo! is worth less, has more debt, and is more expensive in comparison to it's forward looking estimates? Looks like Google wins this battle outright.

MYL - Mylan Laboratories

I have been following a lot of stocks lately, so I thought I would do a post that I thought was primed for some action last Thursday, Mylan Laboratories.

At one (random) point during intraday trading on Thursday, Mylan was at 14.05, and I thought of it as a buy. Why? Well, first of all, Mylan's PEG was an incredibly low 0.67. For perspective, a stock that has a PEG over 2.00 is considered expensive, and institutional investors won't buy it. PEG, by the way, is the stocks price to earnings ration (P/E) divided by the stocks growth rate. A PEG under one usually indicates a cheap stock. During the sell off that occurred on Thursday, there were probably a lot of cheap stocks out there, but this one really jumped out at me.

Of course, I think anyone that knows more than I do would say that you cannot buy a stock based on PEG alone. So let's take a look at the company to see if it has real value.

Mylan makes money by making generic brand pharmaceuticals. Taking a long view, I think that the demand for these (cheap!) drugs will grow as the baby boomer generation continues to age. In the short term, I think the stock will go up because it is available at a cheap price.

What affects performance in Mylan's sector (healthcare)? Aside from the above mentioned obvious maxim concerning the baby boomer generation, I would have to say not much. An economist would say that health care is relatively inelastic, meaning that people will continue to purchase it despite changes in economic factors or the business cycle.

To reaffirm that the stock is cheap, I looked at two other major pharmaceutical companies as well: Merck and Pfizer, both of which are also included in the S&P 500, as is Mylan. Merck had a not so bad PEG of 1.53, while Pfizer had a lofty PEG of 2.56 (as of friday's close).

Now, before we can buy the stock we also have to look at it's balance sheet and cash flow statement. Their balance sheet demonstrates that they have total assets of 4.2B, and total liabilities of 2.6B. So the company is solvent (always a good start). The company also has 700M in current liabilities (debt they have to pay this year). To find out whether this will be a problem, we have to check the companies cash flow statement. This shows that the company has a total cash flow of 1.1B. The company can pay it's debts and is currently making money.

Further the company has a 5 year average dividend of 0.7%...which is being bumped by the dividend they paid this year of 1.7%. This is a company that is raising it's annual dividend, usually a good sign for investors.

Overall, I would rate this company a big fat BUY. Of course, I have no idea what the market will do, or whether we're at a bottom...I don't know much. I did win my fantasy football league last year, but I don't know how much credibility that gives me as a stock picker.

In other news, the Cards dropped a heartbreaker to the Cubs today. The loss put them 4 games back whereas a win would have narrowed the margin to 2 games. They really know how to break my heart.

Good luck if anyone out there decides to buy Mylan.