Roche Holding Ltd. (ADR) (NASDAQOTH:RHHBY)

I don't know why this biotech is so grossly undervalued. I think it is because it is not an American company. But the p/e is well below industry average and the good news about pipeline and approvals just keep pouring in.

Pick based on Trefis analysis as of 2/7/13

Core in my real money portfolio.

Strong cash generation and about 4% yield. Dividend doubled over the last five years and will continue to grow because they have an impressive management which is focused on shareholder value. It really impressed me that they did not give in to the money grabbing of Illumina shareholders (at least as of Jan. 2013...).

In terms of products they have a strong pipeline and don't face any kind of patent cliff like other pharma giants until at least 2015.

Leads in biotech, diagnostic products for hospitals, cancer therapies as well as many tiny markets. PE = 15, 3.8% yield.

With its probably acquisition of Illumina, Roche will be well positioned to revolutionize the healthcare industry by reaching a new level of personalized treatment. Using its "two-pillared" structure (pharma and dx divisions support one another), Roche intends to use the new sequencing technology to discover new biomarkers for diseases and cancers. With these biomarkers they can then develop pharmaceuticals like monoclonal antibodies (which they already are a global leader in thanks to Genentech) that attack the diseased genes/cells directly instead of every cell. Think of it as going from a bombing run to a smart missile when it comes to treatment. It will make the diagnostics more accurate and treatment more effective (not to mention eliminate a lot of the side effects related to chemotherapy).

Real $ play. The upcoming dividend will give you a 4% return. Since they pay out yearly instead of quartly you only need to have this on the record date to be eligible for the dividend.
Unless I am missing something which is very possible.
I still need to do a bit of research but if this is accurate I don't see the down side.

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-Low PE
-Good dividend yield
-Paying back debt
-Recent acquisitions will create shareholder value.

While the pharma sales were a bit poorer, their other side of business in reagents/diagnostics/etc is growing rapidly. And their DNA sequencing businesses have great potential in medicine.

Barron's Roundtable 2011 - Abby Joseph Cohen's pick

Purchase of Genentech gives Roche big part of cancer market. Only about 15% of products go off patent in the next two years. P/E of 13 is cheap.

They have a leading understanding about personalized medicine

It might be going a bit far to call them the Google of biotech, but Roche is positioning themselves well to remain an industry leader well into the future. Their success depends more on the future of biotech than on any specific product. Obviously stay away if you think biotech has a bleak future - and between current health care reform, a slow FDA, ect - that just may be the case. But on the other hand, it's hard to see biotech succeeding and Roche failing at the same time.

Should get a nice bump from FDA accelerated approval of Avastin's use on patients with glioblastoma brain cancer. Short-term play.

TAMYflu

Pharma will gain thanks to flu

swine flu!

weird virus on the rise...watch sales rise ...

swine flu

leverage buyout at wrong time