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Alcon: The Eyes Have It
The ADR Alert
Monday, March 28, 2005
By Alexander Green, Investment Director
#55
** Alcon: The Eyes Have It
Last week the dollar strengthened and world markets fell. As a result, we hit our sell stops in both Sasol (NYSE: SSL) and Embraer (NYSE: ERJ), locking in a 20% profit in the former and taking a short-term loss in the latter.
Today, however, we have a worthy replacement, Alcon, Inc. (NYSE: ACL).
Based in Hunenberg, Switzerland, Alcon manufactures and sells pharmaceuticals, surgical equipment and consumer products that promote the health and function of the human eye. The company has operations in over 70 countries and its products are sold in more than 180 countries around the world.
(Originally, the company was a subsidiary of Nestle, but it was spun off two years ago.)
When most Americans think of Alcon, they think of it as a supplier of disinfectant solution and accessories for contact lens wearers. But the vast majority of the company’s $3.9 billion in 2004 revenues came from surgical and pharmaceutical sales. (Cataract surgery and glaucoma treatments are two leading divisions.)
The surge of aging baby boomers into middle age and beyond is likely to boost earnings in the years ahead. But sales and earnings are already surging.
Last year revenues rose 15% to $3.91 billion. Net income climbed 45% to $871.8 million. Management cited increased product sales, higher gross profit and lower interest expense.
I expect earnings to climb at least another 25% this year.
And if Alcon gets a favorable FDA review of Retaane – its treatment for macular degeneration, the leading cause of blindness in Americans over 55 – the shares could bolt higher in the short term. (Expect results in May.)
Our shares, of course, are Swiss-franc denominated. That means we get a valuable dollar hedge as well.
- **Action to Take***
Buy Alcon (NYSE: ACL) at $88.50 or better. And place a sell stop at $75 for protection. Speculators may want to take a look at the August $100 calls (ACL-HT). But don’t pay more than $1.90.
If you have any questions, feel free to call one of our VIP Trading Services representatives at 888.570.9830 (toll-free) or e-mail: viptrader@oxfordclub.com, or contact Pillar One Advisor Greg Galloway at 800.438.3040 or 407.667.4729.
Stock
Country
Current Price
Comments
Alcon (NYSE: ACL)
Switzerland
New
Buy at $88.50 or better. Place a sell stop at $75.
Statoil ASA (NYSE: STO)
Norway
$16.77
Buy. Sell stop is $15.
Shinhan Financial (NYSE: SHG)
South Korea
$53.57
Buy. Sell stop is $50.
Embraer (NYSE: ERJ)
Brazil
Sell
Stock hit trailing stop.
Coca-Cola Femsa (NYSE: KOF)
Mexico
$24.23
Buy. Sell stop is $21.
Canadian National (NYSE: CNI)
Canada
$62.27
Buy. Sell stop is $61.
Mobile Telesys (NYSE: MBT)
Russia
$35.30
Buy. Sell stop is $31.25.
Sasol Ltd. (NYSE: SSL)
South Africa
Take profits!
Stock hit trailing stop.
Bio: Alexander Green is the Investment Director of The Oxford Club. A Wall Street veteran, he has over 16 years experience as a research analyst, investment advisor, and professional portfolio manager. Mr. Green is also considered one of the most talented financial writers in the business. He’s been featured on “The O’Reilly Factor,” profiled by Forbes and Marketwatch.com, and has written for Louis Rukeyser and several other leading financial publications. He currently writes and directs The Oxford Club Communiqué, the Oxford Insight e-letter, and four elite trading services: one focused on momentum stocks, another focused on companies with significant insider buying, another dedicated to international growth stocks and another focused on short-selling fundamentally flawed companies. Mr. Green is also a top-rated speaker at financial conferences around the country.
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