Month 110 - Buy Low! 12 A-rated Haven Stocks in the S&P 100 Index that aren’t overpriced - August 2020

Situation: There’s no mystery to saving for retirement. A good working game plan is to divert 15-20% of your monthly income to the purchase of stocks and government bonds, and then keep those assets in a 60:40 balance of stocks:bonds. You can also use any bond substitutes (e.g. gold, T-bills, and utility stock ETFs) that typically hold their value in a stock market crash. Mainly use stock index ETFs for your retirement savings but also buy stock in companies that tend to have an above-market dividend yield. Those “shareholder-friendly payouts” happen because the company has good collateral: Liabilities are protected by Tangible Book Value and a cushion of Cash Equivalents. In other words, avoid stocks issued by companies that have become over-indebted. 

Think of the bonds in your portfolio as the collateral that backs your stocks. So, a good way to start saving for retirement is to over-emphasize collateral-thinking: Dollar-average into the low-cost Vanguard Wellesley Income Fund (VWINX), which is 60% bonds and 40% stocks picked from the Vanguard High Dividend Yield Index Fund ETF (VYM). VWINX has lost money in only 7 of the past 50 years, those losses always being less than 10%. Since its inception on 7/1/1970, VWINX has returned 9.7%/yr vs. 10.8%/yr for the S&P 500 Index with dividends reinvested.

The harder task is to stop putting additional money into stocks that have become overpriced. To do that you have to know how to calculate the Graham Number. Benjamin Graham wrote the first edition of The Intelligent Investor almost 100 years ago. It is hard to read because he uses numbers to express almost every pearl of knowledge. The “Graham Number” is simply the rational market price for any stock at any given moment, calculated as the square root of: 15 times earnings for the Trailing Twelve Months (TTM) multiplied by 1.5 times Book Value for the most recent quarter (mrq) multiplied by 22.5 (i.e., 1.5 times 15). So, the Graham Number is nothing more than what the stock’s price would be if it were to reflect a P/E of 15 and a Book Value of 1.5.  The purpose of doing this calculation on your stocks is to know their underlying worth. Benjamin Graham also explained why the 7-year P/E should not exceed 25, assuming that a single year’s P/E (TTM) should not exceed 20, which is an earnings yield of 5%/yr: In a normal inflationary environment, a company’s earnings are likely to grow 3% to 3.5% per year. After 7 years, a CAGR (Compound Annual Growth Rate) of 3.2%/yr takes a P/E of 20 to 25.

My definition of an Overpriced Stock is one that a) has a market price (50-day Moving Average) that is more than 2.5 times the Graham Number and b) has a 7-year P/E that is more than 30. Looking at the 30-stock Dow Jones Industrial Average (DJIA), I see that 5 A-rated stocks are overpriced (see Column AC-AH in Comparisons section of Table):

     Microsoft (MSFT), 

     Apple (AAPL), 

     Nike (NKE), 

     Coca-Cola (KO) and 

     Procter & Gamble (PG). 

Stocks get overpriced because they become popular with investors, leading to a Crowded Trade. Assuming that your goal is to Buy Low, why would you continue to add money to any of these 5 stocks that you already own? You would only do so because you harbor a Positive Sentiment regarding their future prospects, In other words, you would be making a speculative investment (“gambling”). To avoid gambling and instead employ a “risk-off” approach to buying individual stocks, you’ll need clear definitions for A-rated stocks and for Haven stocks to supplement the numbers-based system used above to avoid Overpriced stocks. You’ll also want to favor stocks issued by large companies, since those typically have multiple product lines and unencumbered lines of credit.

Mission: Define “A-rated stocks” and “Haven stocks”. Analyze A-rated Haven stocks in the S&P 100 Index that aren’t overpriced by using our Standard Spreadsheet.

Execution: see Table.

Administration: A-rated stocks are those that have a) an above market dividend yield (see portfolio of Vanguard High Dividend Yield Index Fund ETF - VYM), b) positive Book Value, c) positive earnings (TTM), d) an S&P rating on the company’s bonds that is A- or better, e) an S&P rating on the company’s stock that is B+/M or better, and f) a 20+ year trading history. 

Haven Stocks are A-rated stocks issued by companies that aren’t encumbered with risk factors that are likely to threaten the company’s solvency during a recession. So, companies in the Real Estate Industry (i.e., REITs) and companies in the Financial Services Industry (i.e., banks) are excluded, as are companies with negative Tangible Book Value if Total Debt is more than 2.5 times EBITDA (TTM) or Total Debt is more than 2.0 times Shareholder Equity. 

Bottom Line: With the S&P 500 Index being priced at 29 times TTM earnings (see SPY at Line 28 and Column K in the Table), the stock market is overpriced relative to its long-term P/E of 15-16. But its 50-day Moving Average price is still less than 2.5 times its Graham Number (i.e., 2.1), and its 7-yr P/E is still less than 30 (i.e., 28), per Columns AC and AE at Line 28 in the Table. Using our example of the DJIA, the timely thing to do would be to avoid buying more shares of the overpriced A-rated stocks (MSFT, NKE, PG, KO, AAPL) but to continue buying more shares of SPY. This strategy allows you to retain exposure to volatility in stocks that are Overpriced (because of their future prospects) while using diversification to reduce your risk of serious loss.

Risk Rating: 5 (where 10-yr US Treasury Notes = 1, S&P 500 Index = 5, gold bullion = 10)

Full Disclosure: I dollar-average into NEE, INTC, WMT, JNJ, CAT, and also own shares of MRK, CSCO, TGT, DUK, SO, MMM. From late February through April 2020, I added shares of 6 new companies to my brokerage account--Comcast (CMCSA), Costco Wholesale (COST), Home Depot (HD), Merck (MRK), Disney (DIS) and Target (TGT), while selling shares of Norfolk Southern (NSC) and United Parcel Service (UPS). Regarding the 5 overpriced but A-rated stocks in the DJIA, I’ve stopped dollar-averaging into KO but continue to dollar-average into MSFT, NKE and PG because I expect those companies to continue to dominate their competitors. I have no plans to sell the shares of KO and AAPL that I already own.

The 2 and 8 Club" (CR) 2017 Invest Tune Retire.com All rights reserved.

Post questions and comments in the box below or send email to: irv.mcquarrie@InvestTuneRetire.com

Month 109 - 6 High-yield A-rated Non-financial Growth Stocks in the Dow Jones Industrial Average - July 2020

Situation: The purpose of a retirement portfolio is to accumulate wealth during working years and distribute that wealth during sunset years. The laws of finance that govern accumulation are “reversion to the mean” and “compound interest”. The closest we have to a law of finance that governs distribution is “the 4% rule”. 

If we dollar-cost average our purchase of shares on a monthly schedule during the accumulation period, we’ll never overpay over a given market cycle, i.e., we’ll “buy low” as often as we’ll “buy high” as reversion to the mean works its magic. If we automatically reinvest quarterly dividend payouts, this quarter’s dividend will pay a dividend on last quarter’s dividend as “compound interest” works its magic. During retirement, we’ll spend 4% of our total asset value, as calculated on December 31st of the year just ended, in the coming year. 

A-rated high-yield growth stocks in the Dow Jones Industrial Average (DJIA) have a dividend yield of ~3%/yr. So, if you’ve been dollar-averaging into those stocks you’ll occasionally want to sell shares in one of those stocks to meet next year’s spending goal. But given the stability of those reliable and growing payouts, I’d suggest that you look elsewhere to make up the projected shortfall. Why? Well, look at the spreadsheet of this month’s 8 DJIA growth stocks. If you own shares in all eight companies, you’re likely to enjoy a dividend yield of more than a 3%/yr for years to come. 

Mission: Find A-rated non-financial growth stocks in the DJIA that have an above-market dividend yield; analyze those by using our Standard Spreadsheet.

Execution: see Table.

Administration: A-rated means that S&P assigns the company’s bonds a rating of A- or higher, and assigns the company’s common stock a rating of B+/M or higher. It also means that debt levels are reasonable. So, in a setting of negative Tangible Book Value it is unreasonable for a company to be capitalized more than 50% with debt or to have total debts greater than 2.5 times EBITDA. Exclude financial stocks and stocks that have been traded on public exchanges for less than 20 years. Select only from DJIA stocks that are held in both of these portfolios: Vanguard High Dividend Yield ETF (VYM) and iShares Russell Top 200 Growth ETF (IWY).

Bottom Line: Market volatility is the key concern for investors who plan to maintain their lifestyle during retirement. So, you might as well make money off it. That means automatically buy low (through dollar-cost averaging) whenever the market collapses, and automatically take advantage of mean regression while you’re at it. In other words, use dollar-averaging to buy shares in high-yielding companies for nothing by using a DRIP (dividend reinvestment plan), where dividends pay dividends on previously reinvested dividends. 

Risk Rating: 5 (where 10-yr US Treasury Notes = 1, S&P 500 Index ETFs = 5, and gold = 10).

Full Disclosure: I dollar-average into PG, JNJ and CAT, and also own shares of MRK, CSCO and MMM

The 2 and 8 Club" (CR) 2017 Invest Tune Retire.com All rights reserved.

Post questions and comments in the box below or send email to: irv.mcquarrie@InvestTuneRetire.com

Week 369 - High Quality Producers & Transporters of Industrial Commodities in the 2017 Barron’s 500

Situation: Here in the U.S., debt/capita is growing at an alarming rate and is now greater than $60,000. U.S. Government debt is almost $20 Trillion and has been growing at a rate of 5.5%/yr (i.e., twice as fast as inflation) since 1990. By 2020, the Federal budget deficit will start to exceed $1 Trillion/Yr and the dollar’s status as the world’s reserve currency will be threatened. The gold reserves that stand behind the U.S. dollar (currently worth ~$185 Billion) would have to be increased on a regular basis, as would foreign currency reserves (currently worth ~$125 Billion)

The US economy is no longer capable of growing fast enough to balance the budget for even a single year, without introducing draconian measures. Nonetheless, it is worth noting that those can be effective given that Greece appears to have emerged from that process successfully. But the U.S. could not go through that process and still remain the “top dog” militarily. So, the trade-weighted value of the U.S. dollar will fall at some point, and we will no longer be able to afford imported goods and services. Before that happens, U.S. citizens will need to gradually move their retirement savings into commodity-related investments, as well as bonds and stocks issued in reserve currencies other than the U.S. dollar. 

Mission: Use our Standard Spreadsheet to highlight large U.S. and Canadian companies that produce, refine and transport raw commodities, i.e., materials that are extracted from the ground. Select such companies from the 2017 Barron’s 500 list, but exclude any that issue bonds with an S&P rating lower than A- or stocks with an S&P rating lower than B+/M. 

Execution: see Table.

Administration: The S&P Commodity Index has the following components and weightings:
Natural Gas (17.66%)
Unleaded Gas (12.16%)
Heating Oil (12.13%)
Crude Oil (11.41%)
Wheat (5.15%)
Live Cattle (4.87%)
Corn (4.48%)
Coffee (3.88%)
Soybeans (3.84%)
Sugar (3.80%)
Silver (3.67%)
Copper (3.39%)
Cotton (3.22%)
Soybean Oil (2.98%)
Cocoa (2.79%)
Soybean Meal (2.57%)
Lean Hogs (2.04%)

53.36% of the index represents petroleum products, 32.71% represents row crops, 7.06% represents industrial metals, and 6.91% represents live animals. Ground has to be mined, drilled, or planted & harvested with the help of heavy equipment to yield raw commodities. Those have to be transported by barge, rail, truck, or pipeline before being processed for market. 

We find 8 companies that warrant inclusion in this week’s Table. Seven are obviously appropriate, but the presence of Berkshire Hathaway (BRK-B) needs some explanation (unless you already know it owns the Burlington Northern & Santa Fe railroad). Berkshire Hathaway is the largest shareholder of Phillips 66 (PSX), which has 13 oil refineries and supplies diesel for the largest marketing outlet of that fuel: Pilot Flying J Centers LLC. Berkshire Hathaway purchased 38.6% of that company’s stock on October 3, 2017, and plans to increase its stake in 2023 to 80%.

Bottom Line: Commodity futures haven’t been a good investment, given that their aggregate value is back to where it was 25 years ago, given that the most recent 20-year supercycle recently finished and another is just starting. Nonetheless, the companies that produce, process, and transport those commodities did well over those 25 years (see Column AB in Table). The problem is the volatility of their stocks (see Column M in the Table), and the extent to which their stocks get whacked when commodities become oversupplied relative to demand (see Column D in the Table). If you choose to own shares in these companies (aside from CNI, BRK-B and perhaps UNP), you’d be flat-out gambling. 

Risk Rating: 7-9 (where US Treasury Notes = 1, S&P 500 Index = 5, and gold bullion = 10)

Full Disclosure: I dollar-average into UNP, ADM, CAT and XOM, and also own shares of CNI and BRK-B.

"The 2 and 8 Club" (CR) 2018 Invest Tune Retire.com All rights reserved.

Post questions and comments in the box below or send email to: irv.mcquarrie@InvestTuneRetire.com

Week 341 - Companies in “The 2 and 8 Club” with Strong Global Brands

Situation: You’d like to own stocks that won’t give you heartburn when the market crashes. There are only two ways a company can predictably weather a recession better than others in its industry. By having 1) a clean Balance Sheet (see Columns P-S in any of our Tables) and/or 2) a strong Global Brand. During a recession, consumers will have less money to spend because they’re not making as much. They’ll cut back on frills but keep spending on necessities marketed by companies they respect. Economists call such spending inelastic, and also speak of those companies as having a strong brand. Accountants struggle to define brand value, even though it obviously runs to the billions of dollars for a number of companies, so they call it an intangible asset.  

Mission: Use our Standard Spreadsheet to analyze the 33 companies in the Extended Version of “The 2 and 8 Club” (see Week 329), selecting only those that have a Top 500 Global Brand.

Execution: see Table, where all 21 such companies are ranked by brand value in Column AC.

Administration: We need to know what fraction of sales for each company originate outside the United States. That information should be in every company’s Annual Report but is often missing. Perhaps the reason is that those companies often retain revenues in the country of origin (to avoid double taxation should revenues be repatriated to the USA). But we know that Microsoft, the largest company in this week’s Table, draws more than 60% of its revenues from outside the United States. Over the past 5 years, I have seen two articles estimating that 45-50% of all revenues for S&P 500 companies occur outside the United States.  

For you to attempt to own shares in a third or half of the 21 companies on our list (see Table), you’ll need to keep track of two variables: 1) Dividends (Yield & Growth rates), and 2) Global Brand value. Both will change over time. Brand values are easy to follow (see link above). But some companies will mature in their market and no longer be able to grow dividends faster than 8% a year. A company might cut its dividend, in which case it would no longer be listed in the US version of the FTSE Global High Dividend Yield Index. There will also be new members of “The 2 and 8 Club.”

To move in and out of positions as indicated by your research, you’ll have to become an active stock trader. Dollar-cost averaging is still a good idea, but you’ll likely find that an online Dividend Re-Investment Plan (DRIP) doesn’t have the flexibility you’ll require. A recent study of 13 broker-dealers offers detailed information about those that have the low transaction costs and attractive reward programs. Ally Financial (ALLY) is their top-ranked brand.

Bottom Line: There are only two ways a company can insulate itself from a looming recession: 1) maintain a Clean Balance Sheet, and 2) keep making money because of having a strong Global Brand. This week’s Table highlights 21 brand leaders, over half of which have clean Balance Sheets.

Risk Rating: 6 (where 10-Yr Treasury Note = 1, S&P 500 Index = 5, and gold bullion =10)

Full Disclosure: I dollar-cost average into MFST, MMM, IBM, KO and JPM, and also own shares of MO, TRV, PFE, CAT, and TXN.

"The 2 and 8 Club" (CR) 2017 Invest Tune Retire.com

Post questions and comments in the box below or send email to: irv.mcquarrie@InvestTuneRetire.com

Week 194 - Biotechnology Companies in the Barron’s 500 List

Situation: Biotechnology companies are the high-risk sector of the US stock market. We have not previously discussed companies in this sector, aside from pointing out that Amgen (AMGN) and Biogen Idec (BIIB) had a Durable Competitive Advantage in 2012 (see Week 59). Why? Because our blog is about buy-and-hold stocks that can be expected to pay growing dividends in retirement, which is so attractive to those living on a fixed income. Biotechnology companies, on the other hand, rarely pay dividends because they make products that come off patent ~17 years after FDA approval. That means research and development of the next winning product will consume most of their profits. We’re talking about a growth industry where new technologies rapidly eclipse old technologies, and stability is a mirage.  

For investors who like to gamble in the stock market, the biotech sector provides the stocks they’re likely to pick. And they’ll have many to choose from. For instance, the main exchange-traded fund (ETF) for biotech stocks is the SPDR S&P Biotech ETF (XBI at Line 11 in the Table). It tracks the S&P Biotechnology Select Industry Index, which includes 87 companies. The NASDAQ Biotechnology Index (^NBI at Line 14 in the Table) has 151 companies. The Barron’s 500 List of the largest companies by revenue on the New York and Toronto stock exchanges only has the 4 biggest names, plus AbbVie (ABBV) at Line 10 which is a recent spin-off from Abbott Laboratories (ABT) at Line 9. We’ve included ABT as a “big pharma” reference point. 

Close examination of the Table, shows that Gilead Sciences (GILD) is the only one of the 4 long-established biotech stocks that is not overpriced by our main criterion, i.e., it has an EV/EBITDA (Enterprise Value divided by Earnings Before Interest Taxes Depreciation and Amortization) less than 14. On the negative side, GILD has a 5-yr Beta of 1.11 and an S&P stock rating of B/M, both of which signify earnings uncertainty. Only Amgen (AMGN) pays a dividend, has a low 5-yr Beta, and carries the minimum S&P stock rating (B+/M) suitable for buy-and-hold investors. You can take a look at the drugs currently being marketed by these 5 companies by consulting the APPENDIX at the end of this blog.

There is an issue with overpricing in the biotechnology industry, with respect to both product and stock prices. Some pharmacy benefits managers (PBMs), e.g. Express Scripts Holding Company (ESRX), will not sell the high-priced GILD drugs for treating Hepatitis C Virus (genotype 1). Instead, ESRX has entered an agreement with ABBV to sell its lower-priced Viekera Pak. 

Stock prices for the industry also appear high. Amgen (AMGN) and the NASDAQ Biotechnology Index (^NBI) are more than two Standard Deviations above their 16-yr log-linear trendlines, and have been labeled “potentially overpriced” at the BMW Method website. Experienced investors will look at price/sales (P/S) when such concerns arise. P/S is ~1.8 for the S&P 500 Index. However, the healthcare industry is the most “overbought” of the 10 S&P industries. So, P/S for a typical "big pharma" company like ABT is 3.4, and the 4 biotech firms at the top of our Table have an average P/S of 8.8. It looks like biotech stocks are in a “bubble.”

Bottom Line: If you’re over 50, it is time to focus on retirement savings. You should have at least 4 times your gross annual income in that account by now. None of the 4 biotechnology stocks in our Table with 20 yrs of price data fit the requirements for inclusion in a retirement portfolio. These are high-risk, high-reward stocks. That said, they represent a more prudent bet than competing high-risk assets like gold, international stocks, and high-yield bonds. Those don’t carry anything like the reward potential of biotechnology stocks, given the tens of millions of people per year who move up from poverty to enter the “middle class” in emerging economies like China, India, Brazil, Turkey and South Africa.

Risk Rating: 8

Full Disclosure: I own shares of ABBV.

NOTE: metrics that underperform VBINX have red highlights in the Table; metrics are current as of the Sunday of publication.

Post questions and comments in the box below or send email to: irv.mcquarrie@InvestTuneRetire.com


APPENDIX for Week 194

Gilead Sciences (GILD) has $7.7B in cash holdings for future acquisitions, and specializes in anti-viral drugs. Its current products include 1) Truvada is a combination of two other of the company’s drugs, Viread and Emtriva. 2) Complera is a combination of Truvada and Tibotec’s Edurant. 3) Atripla is a combination of Truvada and Bristol-Myers-Squibb’s Sustiva. 4) Stribild is so far approved for use only in the European Union (EU) and is a combination of Viread, Emtriva, elvitegravir, and cobicisat). 5) Ambisome B is marketed for life-threatening fungal infections that often complicate the treatment of AIDS. 6) Viread and 7) Hepsera are used to treat chronic hepatitis B. 8) Tamiflu is used to treat influenza A and B but is marketed by Roche (which pays royalties to Gilead Sciences until the drug comes off patent in 2016). 9) Letairis is used to treat pulmonary arterial hypertension; Gilead Sciences had to acquire Myogen to obtain its patent for Letairis. 10) Ranexa is used to treat chronic angina pectoris; Gilead Sciences acquired CV Therapeutics to obtain its patent for Ranexa. 11) Cayston is used to treat cystic fibrosis that has become complicated by infection with Pseudomonas aeruginosa. 12) Sovaldi (sofosbuvir) is used to treat Hepatitis C; Gilead Sciences acquired Pharmasett for its patent to use Sovaldi against certain genotypes of Hepatitis C in combination with the established drug treatments (interferon and ribavirin), or with ribavirin alone when patients cannot tolerate interferon. 13) Harvoni, a tablet that is taken once a day for treatment of Hepatitis C genotype 1 and is used without interferon or ribavirin. This breakthrough drug has achieved ~95% cure rates in Phase III studies. Biogen Idec (BIIB) has $3.2B in cash equivalents for future acquisitions and is focused on producing drugs and monoclonal antibodies for cancer and autoimmune diseases. Current products include 1) Avonex (beta interferon) is the company’s core franchise, used to treat relapsing multiple sclerosis since FDA approval in 1996. The current version comes off patent in 2026. 2) Rituxan, a monoclonal antibody against CD-20 protein positive B-cells, is an FDA-approved treatment for non-Hodgkin lymphomas and rheumatoid arthritis. It is marketed by Roche via Genentech (Biogen Idec receives royalties). 3) Tysabri (developed with Elan) is FDA-approved for the treatment of relapsing multiple sclerosis. It is under limited distribution because of producing progressive multifocal leukoencephalopathy in patients carrying antibodies to the Jakob-Creutzfeld virus and/or those receiving treatment for more than two years. An assay is now available to detect the JC virus before starting Tysabri. 4) Tecfidera, an orally-dosed drug used to reduce relapses of multiple sclerosis, received FDA approval two years ago. 5) Plegridy, a long-acting version of Avonex, emerged from Phase III studies over two years ago and received FDA approval in August of 2014. 6) Ampyra, a drug produced by Acorda Therapeutics, is used to improve walking in multiple sclerosis patients. Biogen Idec obtained the license to sell the drug outside the U.S. in 2009; conditional EU approval was granted in 2011. Amgen (AMGN) has built up $28B in cash holdings. Current products include 1) Epogen is a genetically-engineered human erythropoietin used to stimulate red blood cell production in anemia caused by chronic renal failure. 2) Aranesp is a recombinant protein that stimulates red blood cell production, and is approved for use in treating chemotherapy-induced anemia as well as chronic renal failure. 3) Neupogen stimulates neutrophil (white blood cell) production in cancer patients undergoing chemotherapy. 4) Neulesta, another stimulant for neutrophil production. 5) Enbrel is a drug for treating rheumatoid arthritis, psoriatic arthritis, and chronic plaque psoriasis that Amgen obtained when it acquired Immunex in 2002. Enbrel has been issued a new patent that extends to 2028. 6) Sensipar, sold on license from NPS Pharmaceuticals, is used to treat hyperparathyroidism secondary to end-stage kidney disease. 7) Vectibix is used to treat advanced colorectal cancer. 8) Nplate is used to treat ITP (immune thrombocytopenic purpura). 9) Prolia (denosumab) is used to treat bone loss due to hormone ablation, postmenopausal osteoporosis, or metastatic prostate cancer. Celgene (CELG) has $6.9B in cash holdings and specializes in using its proprietary small molecule technology to develop drugs that modulate the immune response or inhibit cytokine production--mainly to treat multiple myeloma. Current products include 1) Thalomid (thalidomide) inhibits blood vessel growth and is used to treat leprosy-related illnesses and multiple myeloma. 2) Revlimib, the successor to Thalomid, is used to treat myelodysplastic syndrome and relapsed or refractory multiple myeloma. 3) Pomalyst was approved for use in refractory multiple myeloma in 2013, and is in Phase III studies for potential use in myelofibrosis. 4) Otezla was approved for treatment of psoriatic arthritis in 2014, and is in Phase III studies for potential use in ankylosing spondylitis as well as being up for FDA approval to treat psoriasis. 5) Abraxane (via acquisition of Abraxis BioScience in 2010) is approved for use in metastatic breast cancer, non-small cell lung cancer and pancreatic cancer. 6) Istodax (via acquisition of Gloucester Pharmaceuticals in 2010) is used to treat T-cell lymphoma. 7) Otezla (apremilast) is used for treatment of psoriatic arthritis. AbbVie (ABBV) has $10B in cash and investments but also carries long-term debt of $14B. Current products include 1) Humira, the injectable tumor necrosis factor (TNF) blocker that is the leading treatment for rheumatoid arthritis worldwide. It is also approved for use in juvenile idiopathic arthritis, psoriasis, ankylosing spondylitis, ulcerative colitis, Crohn’s disease, and spondyloarthritis. Its US patent expires in less than two years; competing drugs include Remicade and Simponi (both marketed by Johnson & Johnson) as well as Enbrel (marketed by Pfizer). 2) Tricor and Trilipix, for use in treating high cholesterol or high triglycerides, went off patent in 2012. 3) Niaspan, an extended-release niacin supplement. 4) Synthroid, a long-standing staple for treating hypothyroidism. 5) AndroGel (testosterone replacement therapy). 6) Lupron, for prostate cancer. 7) Synagis, for treating respiratory syncytial syndrome, is only marketed outside the US. 8) Kaletra and Norvir, for treating HIV.