You are right, value matters. Price and value are sometimes related and sometimes totally disconnected. What I should have said is if you pay a low price relative to true value then future returns will be high. In the case of ABT, The price is disconnected from the value. ABT's valuation is much higher, thus there is a huge opportunity to reap high future returns.
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So many investors today have no ability to wait for good things to happen. They grow impatient so quickly and move to the ideas that are working right now. Even if those ideas are momentum trades and already overpriced.
They miss the things right under their noses because they can't stand to hold something that isn't performing in that moment.
This mentality creates the best opportunities. High future returns come from low prices. ABT is priced to provide high future returns now. So the lower the price goes the higher the future returns will be to new purchases.
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STJ metrics (available to everyone) show they are running their company BETTER that ABT. Good for Miles to see that! Operating Margins (Overhead) and Profit Margins (to sell the products) show that STJ is not the business set up to suck up profits for the (BIG GUYS), you know, the kind of country-club people I have no time for. The non-invasive testing devise business (like Alere) is in a 20% 2 year decline on margins. My assesment is that Miles wanted to control that decline by offering's to Alere. Makes sense right? Control the decent and amortize the initial cost with control of it's decent. Miles chose to not pursue tax inversion like
Medtronics. Having done that he realized the Invasive Medical devise market is the choice. Doing simple
assessment of Profit Margins, there is a clear 1.9% differential favoring STJ vs. ABT current stats.
Bring in the synergies of face to face marketing and operational cost reduction, ABT will blow away the current stock price in the $38.00 range. Yes, Miles jumped on Alere like many people would, but thankfully we'll be modestly burned by assessment based on litigation for years 2013 to now and stock holder equity (actually higher now), 13m is the payoff. At this time, believing the S&P will be hard pressed to touch 2100 prior to a well deserved major correction, I will stage buys on ABT in .50cent downside increments in lots of no more than 250 shares per buy until $34 anything, then I will go long @ 1000 share lots. Yea, I'll be even richer in a couple of years, but the downside is that I have to feel guilty for it.
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Bought ABT on Friday (May 20) @ 37.70. Along with some CSCO I bought a few weeks ago @ 26.35.........2 great long term holds that have strong and growing dividends.