Top-performing mutual funds added to positions in drugmaking
stocks in recent months, includingActavis (
), a maker of generic remedies.
IBD found 70 funds buying the stock in their most recent
reporting periods, investing an estimated $818 million.
The company is a leader in its industry and is adding to its
size through acquisitions. Its agreement to buy Warner Chilcott
is expected to close in the fourth quarter. The deal creates a
company with $11 billion in annual revenue and increases Actavis'
branded drug business to 25% from 7% of total revenue.
The company was previously known as Watson Pharmaceuticals,
but changed its name when it acquired Actavis Group last
Actavis has an IBD Composite Rating of 99, and is now 3% past
a 133.10 buy point of a flat base.
On July 25, Actavis beat expectations by reporting a 42% rise
in Q2 earnings, ex items. Sales were up 47%, accelerating from
the previous two quarters' 13% and 24% increases.
In June, the U.S. Supreme Court dealt Actavis a setback in an
FTC complaint that Actavis violated antitrust law when it made a
"pay for delay' deal with Solvay Pharmaceuticals. The case was
sent back to a lower court.
Actavis' Medical-Generic Drug industry groups ranks a middling
53, but it's not the only highly rated stock in its group.Mylan (
) has an IBD Composite Rating of 94 and an average three-year
earnings growth rate of 26%.
Sometimes leading medical stocks appear in both the New Buys
and the Top Funds' Latest Sells features. The Latest Sells
feature can help spot stocks that are starting to fall out of
favor of big institutional investors like mutual funds. Look for
those that are starting to show topping action or whose
Accumulation/Distribution Ratings are deteriorating.
In this case, however, recent selling inCelgene (
) may be more reflective of fund portfolio rebalancing than
widespread investor disfavor.
The biotech company's Acc/Dis Rating slipped in June as the
stock was forming a bottom to a second-stage base. Some
distribution is common during consolidations. More recently,
Celgene's Acc/Dis Rating has picked up to B+, indicating solid