Q I have concerns about my shares of Sanofi-Aventis. Are things looking up?
P.Z., via the Internet
A This French pharmaceutical firm hopes to expand beyond drugs, which face competition from generics and new rivals.
Patent expirations for some of its top-selling drugs through 2015 include the anti-clotting treatment Plavix.
That’s why it recently agreed to pay $1.9 billion to buy consumer health care company Chattem Inc., maker of products such as Selsun Blue shampoo, Gold Bond skin-care products, Cortizone-10 and Icy Hot pain-relief medicine. The deal gives it a strong entry into the U.S. over-the-counter marketplace.
Chief Executive Christopher Viehbacher has said the company is likely to make more consumer health care acquisitions, using a strong cash flow. Since coming on board from GlaxoSmithKline PLC in late 2008, Viehbacher has cut costs and streamlined research efforts.
Sanofi-Aventis (SNY) shares are down 3 percent this year after last year’s 27 percent increase. The company had a net profit of $23.4 million in its most recent quarter.
Its human vaccines business has had strong sales growth thanks to flu drug sales, while sales of its diabetes drug Lantis are up as well. Europe represents about 45 percent of revenue and the U.S. 30 percent, with its fastest-growing markets outside the U.S.
The consensus rating on Sanofi-Aventis stock by Wall Street analysts is “hold,” according to Thomson Reuters.
The company has combined its Merial animal health business with Merck & Co.’s Intervet/Schering-Plough unit. The resulting joint venture commands 29 percent of the $19 billion annual global market for medicines for pets and livestock.
Earnings are expected to decline 75 percent this year and go down another 1 percent next year.
Q As a shareholder in Fidelity Magellan for many years, what can I expect over the next decade?
V.M., via the Internet
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A With $25 billion in assets, this flagship fund has declined from its peak of $110 billion a decade ago and continues to lose investors.
It is a flexible fund that allows portfolio manager Harry Lange to actively pursue growth, which can result in an erratic ride.
Fidelity Magellan is up 60 percent in the last 12 months to rank in the top fifth of large growth funds. Its three-year annualized decline of 7 percent places it in the lowest fifth of its peers.
“I have a ‘hold’ rating on Magellan Fund right now because, while it’s not a bad choice for anyone, there are better Fidelity large-cap growth funds,” said Jack Bowers, editor of the independent Fidelity Monitor (fidelitymonitor.com . “For example, Fidelity Blue Chip Growth Fund has more tech stocks and is a pure play on growth stocks.”
Lange, who has been broadening the fund’s holdings to spread its risk, spent a decade running other Fidelity funds before taking over Magellan in 2005.
His portfolio of up to 300 names focuses on fast-growing companies that are benefiting from solid trends and don’t cost too much. They are often from traditional growth sectors. He has more than $1 million of his money in the fund.
Industrial materials represent about 17 percent of the portfolio, with other concentrations in hardware, financial services and telecommunications.
This “no-load” (no sales charge) fund requires a $2,500 minimum initial investment and has an annual expense ratio of 0.71 percent.
Q Does the old rule of thumb still apply in which you subtract your age from 100 to find the percentage of your portfolio that should be in stocks?
M.R., via the Internet
A “With bond yields so low, that rule of thumb is challenging to a lot of people,” said Mark Balasa, certified financial planner and CPA with Balasa Dinverno Foltz & Hoffman financial advisers. “Sometimes, you must modify a rule of thumb to take into account realities.”
He recommends running a cash-flow projection for retirement using one of the many calculators online. This will tell you how much you’ll need in retirement and what you must do to get there, which should help you determine stock and bond mix.
Andrew Leckey answers questions only through the column. E-mail him at [email protected].