Investing in Big Pharma: WOW Wins a Round Against a Veteran Boxer
By Adam Lass
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Buffet has stopped accumulating Johnson & Johnson (JNJ:NYSE).
JNJ is losing “The Battle of the Stents” to Boston Scientific (BSX:NYSE).
Medtronic Inc. (MDT:NYSE) is losing its stent battle in the courts.
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Investing in Big Pharma: WOW Wins a Round Against a Veteran Boxer
And now we know the rest of the story: As WOW readers are painfully aware, Bryan and I recommended shorting Johnson & Johnson (JNJ: NYSE) back in the latter days of February as it was setting new low after new low.
And for some 45 trading days, we were right as rain, as the puts we recommended picked up almost 90%. And then someone quietly started buying shares. Fine, I figured, someone is doing a little bottom feeding.
Make that a lot of bottom feeding. Turns out we we’re going head-to-head with the most ultimate value guy: Warren Buffet, who just announced that he has quietly been doubling his stake in this oldest of old-school Pharma giants.
So who’s winning? I should like to point out that since Berkshire Hathaway (BRK:NYSE) halted its voracious sucking up of loose Johnson & Johnson (JNJ:NYSE) shares, price has resumed its downside march, and our puts are once again in the black.
So what’s hurting JNJ so bad? Among other issues, it committed an enormous amount of cash and prestige on its entry into the drug-eluding stent sweepstakes. In case you missed, it, these are tiny little tubes that they stick inside arteries that kick out drugs to prevent clotting, rejection, and infection.
Nice idea, except JNJ’s entry is getting its butt kicked by Boston Scientific (BSX:NYSE). Just this week, JNJ’s Conor Medsystems unit conceded that its CoStar drug-eluting stent has proven to be inferior in reducing major cardiac events compared with the Taxus Express stent made by Boston Scientific.
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And now that Warren has outed himself, it will be just that much more difficult for him to resume adding shares without incurring excess premiums. Fortunately, he is most patient and willing to wait a decade to make his money, and we only need another 30 days to make more of ours.
And speaking of WaveStrength Options Weekly short candidates in the stent biz, Medtronic Inc. (MDT:NYSE) is very sad this week as well, as the U.S. District Court for Delaware has ruled that competitor Advanced Cardiovascular Systems did not commit “inequitable conduct” in obtaining the much-disputed “Lau” stent patents after all.
Medtronic’s response went something along the likes of, “That’s just not fair!” and assures us that it will appeal the ruling to a federal circuit court.
WOW readers’ MDT puts are up some 16% today, and ought to be setting new highs again shortly.
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Adam Lass is the founder and manager of the WaveStrength Group, and is a contributing editor for Taipan Financial News. As the creator of WaveStrength’s proprietary analysis system, Adam’s expertise has shaped a franchise of successful investment newsletters and services, including WaveStrength Options Weekly and WaveStrength Apex.
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