Epiphany Investing

Searching Out the Optimal Portfolio of “Revelation” Stocks

Exiting Schering Plough, Looking at Going Global

Posted on | June 24, 2009 Time: 10:22 am |

In line with yesterday’s post on some pending changes to the Secular Trends Model Portfolio, I am blowing out the remaining 1850 shares of Schering-Plough in the model. SGP has really just been a floater since the announcement of Merck’s buyout in early March, which initially valued Schering shares at $23.60 in cash and stock.

drugtakingSince I have no particular desire to hold MRK shares (or deal with the recordkeeping of this corporate event), I’m getting out now, happy with the 90% gain but a little frustrated that I didn’t exit on March 10th. At the time I was still quite skittish on the broader markets, and my thinking was that I was happy to ride along with a stable Big Pharma (MRK as the tracker) through the Spring. If I had known the S&P would shoot up 40% those three months, well - you get the picture.

Selling 1850 shares SGP at $23.70, and making a note to look at buying into a future IPO of Schering’s animal health business if it is to be divested to appease regulators.

CASH NO GOOD

With the SGP proceeds along with my FCX profits and general dividend collections, I’ve now got quite a bit more cash than any capital allocator should be comfortable with. No investment manager should be getting paid a dime to hold cash assets at 1-2% interest; retail investors that want cash should buy money markets and avoid paying a stock fund manager to sheepishly hedge their fear.

I’m using my research time to decide between several strong international investments, with a focus on India, Brazil, and South Africa.

Brazil and South Africa are both rich in natural resources, which is one of my favorite secular trends. Brazil gets extra points for locking up long-term capital from the Chinese towards developing their oil resources, and for finally getting religion on maximizing their potential for agricultural supremacy. brazilfarm

South Africa’s platinum leadership is also quite enticing (more on this theme to come), as is the prospect for the country to take a big wheelhouse kick forward as they host the World Cup in 2010.

And while India has little in the way of natural resources, they are quite rich in intellectual and human capital, two resources that will be put to great use over the next decade. All 3 nations can expect to see organic GDP growth this year to the tune of 3-5%, far above the best hopes of the “developed” world.

Ryan Barnes

Disclosure: Author does not hold positions in the companies mentioned

More on this topic (What's this?)
Merck Stokes M&A Fires with $41.1 Billion Bid for Schering-Plough (Money Morning, 3/9/09)
MRNA (All Allan, 2/23/10)
Why Standard Flu Vaccines Won’t Make Investors Rich (Contrarian Profits, 5/5/09)
Read more on Schering-Plough, Merck at Wikinvest
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Category: Agriculture, Basic Materials, Big Pharma, Investing Philosophy, Secular Trends Portfolio
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