Top Funds Pick Up Generic Drugmaker Actavis


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Top-performing mutual funds added to positions in drugmaking stocks in recent months, includingActavis ( ACT ), 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 year.

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 ( MYL ) has an IBD Composite Rating of 94 and an average three-year earnings growth rate of 26%.

Sell Side

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 ( CELG ) 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 institutional support.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Mutual Funds
Referenced Stocks: ACT , CELG , MYL

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