Polliesdividend

Bad Timing on buying AbbVie?

Bad timing for my new buy – AbbVie?

Last week, on Monday the 24thof June, I’ve made a new buy for my Vrijheid Fonds. I’ve averaged down on one of mine Dividend Aristocrats and I have bought 8 shares of ABBV at $ 78.425 per share (incl. fees).  For more information about this buy, just read my post recent buy Abbvie.

www.polliesdividend.com

I was very happy with this buy, because with this buyI’ve added almost €13 (after taxes) of projected dividend to my Vrijheid Fonds for 2019. And at the time of buying, I continued to believe that AbbVie was going to fill the gap that Humira will leave mid 2013. The gap you ask, well Humira generated nearly $20 billion in sales last year, or around 60% of AbbVie’s revenue. And the patent runs out in mid-2023.

 

Life cycle

Pharmaceutical companies, like AbbVie, make money by investing in R&D to develop drugs that they can then patent and sell at good prices. However, patents aren’t granted for an indefinite term. So, companies continue to earn profits through the life of the patent while developing other drugs than can be patented to generate revenue that takes its place.

And this cycle then continues. Because once the patent runs out, generics flood the market and then of course the increased competition ensures that prices and sales drop off sharply

 

Takeover

As I have written, I was happy with my buy. But then I heard the news the next day. On Tuesday, June 25th, AbbVie announced a new take over which came as a surprise for most investors. AbbVie announced it will buy Allergan for $63 billion, combining the companies behind Humira and Botox. It is still just an announcement, it’s far from a done deal. Because the companies will need necessary approvals, although the lack of overlapping products likely means that there won’t be anticompetitive concerns.

 

AbbVie said combining with Allergan will give it a “diversified product portfolio [that] meets our strategic goal to reduce reliance on Humira.” At this moment I find it hard to analyze this take-over. However, the deal should greatly benefit AbbVie, and should help protect its growth after Humira loses exclusivity in the U.S.

Most investors weren’t happy with this news because AbbVie stock fell 15% on the news. This was the first (emotional) reaction. In the next days the stock price slowly raises again.

 

Bad Timing?

I just bought my shares the day before this announcement. Couldn’t I have waited just another day? That is the question that went through my mind a couple of times on that Tuesday. And every time when I asked myself that question, I came to the conclusions that is impossible to time the market.

And as I wrote in my buy-post: I’ll rather be on time in the market, then timing the market. Or as PassiveCanadianIncome wrote: Stock price is a kind of short term noise. 😉

This is a big acquisition by AbbVie. And I have read a lot of positive things about this acquisition. And yes, also some negative. But I’m a positive guy. I did a quick analysis on AbbVie and I still like what I see. So, I wouldn’t have made another decision if I knew of this acquisition. I still would have pulled my buy trigger. The only difference is that probably would have bought 1 or 2 stocks more. But hey, you can’t win them all.

What are your thoughts about this acquisition? Do you think AbbVie is still a buy?

I like to hear from you.

Cheers,

Pollie

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10 thoughts on “Bad Timing on buying AbbVie?

  1. KeithX

    Hi Pollie. It’s been a while since I’m commented, but this article raises an issue that all investors deal with at some time or another. A pragmatic approach like you are taking is about all that you can do, even though it hurts a little at the beginning.

    It could have been worse, though. Imagine that you had sold shares of Allergan the day before the announcement. AGN was up 27% the next day, from $129 to $164! Losing a share is one thing, losing 27% because your timing was off by a day is another.

    Hope you are enjoying the summer, and staying cool.
    KeithX

  2. j0s

    I don’t know if you are using deGiro but I like it so much that you can buy smaller amount for reasonable costs.

  3. I Want Dividend

    Grats on the purchase. I also see AbbVie as a company with great fundamentals. I bought 10 additional shares, but I placed the order after the price dipped after the takeover announcement. For me it was a good chance to reduce my average purchase price and pick up these shares at a price where the yield is very attractive.

    I always, at least try, to not feel bad about bad luck in timing. In the long run I don’t believe that timing makes a big difference on the return. This because I can’t influence events happening in the market so I don’t think I should have a good or bad feeling about timing.

    I tend to make all my purchases at the end of the month just after my salary has been paid so I don’t often think about timing, because I simply don’t have any money available in my account before payday so there is no reason to try timing.

    Sometimes I’m lucky making a purchase right before the market rallies and sometimes I’m unlucky timing a mall REIT purchase just before the market get bearish again regarding malls due to eCommerce threats.

    I think the brains tend to mainly remember ‘the pain’ from bad timings so bad timings are experienced and rememberred longer than purchases which were luckily timed.

    I also believe that it’s good for private investors to have some investing schedule which avoids timing making a big difference on the total return. If someone wants to invest I would always advice to make a small monthly purchase over putting a big lumpsum of money instantly into stocks risking to make a big investment right before a market correction.

  4. DivGroJourney

    Pollie, I am sure you were happy with the stock price at 78$. So, it dropped the next day and as you publish your article it is almost back up again. This time I was lucky to jump on at the lowest point but a few weeks back with the major drop of 3M I was not so lucky, the stock kept falling another 15% the following days. Could I have gotten a better deal? Sure. But I was happy with the price I got.

  5. Passivecanadianincome

    hey Pollie nice buy and good read. Thanks for including me.

    I really like Keiths point about people selling agn the day before. That would definately make me kick myself.

    The price has already recovered so much, seems the market likes the addition!

    keep it up
    cheers Pollie

  6. Doug

    Short term noise isn’t good of course it would feel better if you had waited a day to buy lol but in the long run that price won’t matter if it goes back up. It’s a great buy even at the price you paid.

  7. Mr. Groeigeld

    AbbVie is still a buy I think, shown by the price return already since it has fallen.
    I buy at fixed moments in the month so less timing for me. Yes, sometimes I also feel stupid a day after, but then I just try to see it as noise and focus on the dividends it brings.

  8. DKK

    Great article and very recognizable. Maybe you have made a better buy than you think :). Currently, AbbVie’s dividend is $4.28 per share. Your 8 new shares will add $34 per year (or EUR 26 after taxes).

  9. Investeerder

    I think it’s just bad luck, but ABBV is still worth buying. I was a lucky fellow to buy on the 25th and get some shares for a nice price. My expectation is that ABBV will continue to grow.

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