Astrazeneca Announcement

[Arborbridge]

It is important to try to keep up with what may happen though but I certainly do not worry about debt levels for instance because I think long before debt levels become a concern there are usually other straws in the wind.

Dod

That's an interesting POV. I thought debts level (increasing) were a straw in the wind, a major one. Which factors would you pick out as important, or more important than debt?


Arb.

[Dod101]

You are putting me on the spot Arb. I see checking debt levels for instance as something very difficult for the average outsider to do anyway (just look at Carillion. How many shareholders expected them to say they were in breach of their covenants if they measure us now?) I also see it as second guessing the directors. Difficult to pinpoint definite straws in the wind but the general culture, high dividend yield and general 'style' all seem to me to be very important to keep an eye on.

My good 'sell' calls had little to do with checking the numbers in the accounts.

Banks in 2008. To me the writing was on the wall in neon lights in the form of the financial situation rapidly getting out of control fuelled by sub prime lending and banks behaving the opposite way to conservative low key businesses

Supermarkets in 2014/5. The entire marketplace being disrupted by the newcomers and the advent of internet shopping.

Support services. A very hit or miss business which does not seem to attract the best talent and so much of it can be fudged in the short term in order to win contracts.

So my calls have not got much to do with 'mechanics' and much more to do with 'softer' factors which are difficult to explain . Some would call it 'gut' feeling.

Sorry for being so vague.

Dod

[idpickering]

So my suggestion is that Wizard ignores rumours, random price movements and speculation, either in the press or on gossip boards.

TJH

Well said TJH, but rather than directing the comment to one individual, it's something a number of us could learn from, me included.

Ian.

[monabri]

The "put option" (see GSK's own info in the link) would increase debt from £19b to c£27b (based on a conversion rate of 0.8).

Thus to then consider further debt to purchase part of Pfizer's operations might lead to a "strain" on the annual ~£3.8b cost of the divi.

Free cash flow is ~£1.7b (figure from the GSK update in October) so there would be a need to increase debt.

[moorfield]

Which factors would you pick out as important, or more important than debt?

For me, the direction of travel of non-current liabilities and operating cash (which ultimately pays the dividend):

[idpickering]

Personally I’ve found this thread to be extremely useful as it meandered away from the initial subject of third-generation, irreversible epidermal growth factor receptor tyrosine kinase inhibitors.


Thanks also Ian for starting the thread. If people don’t find the news interesting or relevant they can always ignore it and how discussions in these sort of threads can evolve and grow and uncover other interesting things I find valuable & it was Ian who planted the seed in this case

- Julian

Thank you for your kind words Julian. So much nicer than I get from other quarters sometimes, but we're all adults here, I hope. This is the HYP Practical board, and if I can initiate on topic conflab on here, for the benefit of us all, as is my aim, then that's great.

Ian.

[Wizard]

All a bit 'in the weeds' for 'devout' HYP holders I would have thought.

That's your opinion. I am one, (devout HYPer) but I still like to keep up to date with any announcements from any of my holdings, as I'm sure others here are too.

Ian.

Well said Dod. It surprises me that certain quarters still don't get it. I hold both pharmas in roughly equal value, and am happy to just let them do their thing, and pay me juicy dividends while they do.

Ian.

I can understand either position, but struggle to see how they are not contradictory.

You're absolutely right monabri, and long may such discussions continue. I just wish the doubters would take it elsewhere, and just let us do what we do.

Ian.

I asked for views on why one pharma company had a significantly higher yield than another, I struggle to see why that is not a perfectly reasonable question for this board. I am grateful to those who have offered an opinion and see at least one other person also found that useful.

Terry

[fisher]

I asked for views on why one pharma company had a significantly higher yield than another, I struggle to see why that is not a perfectly reasonable question for this board. I am grateful to those who have offered an opinion and see at least one other person also found that useful.

Terry

I first bought Glaxo (GSK) back in 2005. I first bought Astra Zeneca (AZN) back in 2009. I have bought more of both subsequently on a number of occasions and I have sold some GSK relatively recently.

As I remember it (I haven't checked records on this so it is anecdotal):
When I bought Glaxo in the early days (maybe when I first bought in 2005) I remember AZN seemed to be priced at a premium to GSK on a yield basis (AZN yield was quite a bit lower than GSK yield) and GSK was the obvious HYP choice. It seemed that AZN was held in higher esteem and I never worked out why (I didn't really try to find out). After a few years AZN yield got closer to GSK yield and AZN seemed a reasonable bet for more diversification so I bought some of them as well. Then, a few years ago, Pfizer launched a bid for AZN and the price rocketed. The bid failed but the price stayed significantly higher than it had been relative to GSK. AZN has been up and down since then but I think it has stayed higher than the GSK price (relatively) ever since. In the last year Neil Woodford has been dumping GSK and has given it a bad press. I can't remember his reasons (they will be easy to search for) but, whatever you think of him, there will be other people thinking the same as him or others copying him and this may have also caused GSK to slip back.

I think AZN is seen as more of a potential takeover candidate and also seen to have more growth prospects but I have no real evidence for this as a I follow Strategic Ignorance quite closely.

My IRR for AZN and GSK since I first bought them (2009 and 2005 respectively) and including subsequent purchases and disposals is: AZN 12.61%, GSK 5.7%.

I don't know if this helps you Terry, but I thought your question was quite valid and seems to have been either misunderstood or else lost in all the posts since then.

[idpickering]

All a bit 'in the weeds' for 'devout' HYP holders I would have thought.

That's your opinion. I am one, (devout HYPer) but I still like to keep up to date with any announcements from any of my holdings, as I'm sure others here are too.

Ian.

Well said Dod. It surprises me that certain quarters still don't get it. I hold both pharmas in roughly equal value, and am happy to just let them do their thing, and pay me juicy dividends while they do.

Ian.

I can understand either position, but struggle to see how they are not contradictory.

You're absolutely right monabri, and long may such discussions continue. I just wish the doubters would take it elsewhere, and just let us do what we do.

Ian.

I asked for views on why one pharma company had a significantly higher yield than another, I struggle to see why that is not a perfectly reasonable question for this board. I am grateful to those who have offered an opinion and see at least one other person also found that useful.

Terry

Hello Terry, thanks for your message. What I meant in my comments above was, obviously I want to know what's happening with regards my holdings, such as announcements. Although I'm not likely to carry out any knee-jerk action anyway, and I like to received the dividends whilst doing so. As for AstraZeneca/GlaxoSmithKline, I'm happy to hedge my bets between them, and take the average yield on offer between them.

Ian.

[Wizard]

OK, thanks Ian. I apologise if I have come across grumpy of late but work has been a bit troublesome in the last couple of weeks. My initial comment re this announcement was specific to it, given the content being very technical and I suspect hard to fatjom if somebody is not very well versed in pharma. Other announcements you post, such as the Tesco & Booker one are very helpful.

Terry.

[idpickering]

OK, thanks Ian. I apologise if I have come across grumpy of late but work has been a bit troublesome in the last couple of weeks. My initial comment re this announcement was specific to it, given the content being very technical and I suspect hard to fatjom if somebody is not very well versed in pharma. Other announcements you post, such as the Tesco & Booker one are very helpful.

Terry.

Hi Terry, no need to apologise. I'm certainly no expert believe me. I enjoy reading your posts as you articulate them very well, and keep us on our toes.

Ian.

[Arborbridge]

You are putting me on the spot Arb. I see checking debt levels for instance as something very difficult for the average outsider to do anyway (just look at Carillion. How many shareholders expected them to say they were in breach of their covenants if they measure us now?) I also see it as second guessing the directors. Difficult to pinpoint definite straws in the wind but the general culture, high dividend yield and general 'style' all seem to me to be very important to keep an eye on.

My good 'sell' calls had little to do with checking the numbers in the accounts.

Banks in 2008. To me the writing was on the wall in neon lights in the form of the financial situation rapidly getting out of control fuelled by sub prime lending and banks behaving the opposite way to conservative low key businesses

Supermarkets in 2014/5. The entire marketplace being disrupted by the newcomers and the advent of internet shopping.

Support services. A very hit or miss business which does not seem to attract the best talent and so much of it can be fudged in the short term in order to win contracts.

So my calls have not got much to do with 'mechanics' and much more to do with 'softer' factors which are difficult to explain . Some would call it 'gut' feeling.

Sorry for being so vague.

Dod

Well, that's interesting. If one cannot put one's finger on it, then it's all done by some emotional response - which is, after all, what a gut feeling is. The difficulty with this approach, is that it is then very hard to pass on any rationale to anyone else.
However, I'm not surprised at your response. I've come to the conclusion over many years that some of the "great" investors seem to have an emotional response to investing - not that they would admit to it. As in many areas of human activity, they form an opinion which comes by astutely observing (probably subconsciously), make an emotional decision and then pick out a few notable facts and figures which support their idea. Their initial "sieve" might be mechanical, but the final decision whether to buy of sell, or which sectors to avoid, may not be.
This happens in very many walks of life. Those who are proved right are lionised, and those who guessed wrong are not.

Even in our own humble sphere, TJH's success is said to be down to his method, but a number of people have realised that there is a "secret sauce" he uses on top of the mechanics - this is his gut feeling.

Arb.

[Dod101]

Thanks for that. I am no 'great' investor just in case anyone thinks otherwise! I think though I am fairly emotional in most senses of the word but I would not want to over egg that side of things.

I am not in the least 'knocking' the more mechanical approach because I do think that is necessary especially in the earlier stages of ones investing life, but I have always said that investing is more art than science and that is what is coming out here.

Obviously I cannot comment on TJH's approach. It is clearly methodical but a bit too mechanical for me. For instance I had accumulated £2000 or so of dividends which I did not want to extract from one of my ISA accounts so decided to reinvest it. I chose BAT just by glancing across my portfolio. I knew that it was not one of my biggest holdings and I know that it is not the highest yielder. The price was under £50. That was good enough for me. Maybe a method like TJH's would have been better but I did not bother to take the trouble so bought there and then.

Dod

[monabri]

Issued today

http://www.londonstockexchange.com/exch ... 89200.html

The bit that caught my attention was

"Under the oncology collaboration with Merck, announced in July 2017, AstraZeneca is potentially eligible for more than USD6 billion of future Sustainable and Ongoing Externalisation Revenue in the form of sales-related and approval-related payments in addition to option payments until 2019. Following this new approval for Lynparza, AstraZeneca will receive USD70 million in Sustainable and Ongoing Externalisation Revenue."

[miner1000]

I asked for views on why one pharma company had a significantly higher yield than another

I am not sure if this has been answered Terry. My six pennyworth is that AZN is still considered a growth play with heavy investment in a pipeline of potential blockbuster drugs. GSK is morphing into a consumer healthcare giant with a mature profile and associated (somewhat) limited growth.

Hence the difference in yield. GSK is more of a pharma "utility". All IMO of course.

I must admit when the discussion got to third-generation, irreversible epidermal growth factor receptor tyrosine kinase inhibitors, and then on to oncology collaborations I became quite dreamy and decided to lie back and think of Doris.

Regards, Miner