Back into Spain with a Unique Medical Play

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

Global stock markets stabilized last week with the Dow Jones up 0.61% and the S&P 500 rising 0.81%. The MCSI Emerging Markets Index also recovered after a sharp sell-off by ending the week up 1.41%.

Your Bull Market Alert positions were considerably more volatile — fortunately, mostly to the upside. Last week’s recommendations Thermo Fisher Scientific, Inc. (TMO) jumped 4.10% and Google, Inc. (GOOG) rose 3.88%. Long-time holding Bank of Ireland (IRE) added 3.71%.

With Google settling down this past week, I am recommending the April $1,180 options (GOOG140419C01180000), if you are looking for more upside in this recommendation.

You were also stopped out of your bet on the iShares MSCI Spain Capped (EWP) by pennies.

This is extremely frustrating, as Spain remains one of my favorite investment themes for 2014. After all, Spain just recently exited its euro-zone bailout and recorded its biggest drop in unemployment in nine years. Spain also sold a record amount of debt last week, pushing borrowing costs to a seven-year low. Meanwhile, the Spanish economy expanded 0.3% in Q4 of 2013 and the government estimates that the economy will grow at least 0.7% this year.

This week’s Bull Market Alert recommendation — Grifols SA (GRFS), a Barcelona-based vertically integrated producer of plasma derivatives — combines the two themes of a Spanish recovery and the recent strong performance of the medical and biotechnology sector.

Founded in 1940 in Barcelona, Grifols was one of the first to discover how blood plasma can be removed from whole blood without depleting red blood cells. The company’s activities today include sourcing raw material, manufacturing various plasma derivative products and selling and distributing final products to healthcare providers.

International expansion is a key component of Grifols’ growth strategy. Though that expansion began in the 1990s, its acquisition of North Carolina-based Talecris Biotherapeutics two years ago made Grifols one of the three largest global manufacturers of plasma-based protein biological medicines. Today, the global plasma business is essentially an oligopoly, with Baxter, CSL and Grifols holding a majority of the world’s market. Each company has roughly a 20% share. Most recently, Grifols inked a $1.7-billion deal to buy Novartis’ (NVS) blood testing diagnostics unit.

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Grifols’ per-share earnings in ADRs have grown by double-digit percentages the last seven quarters. In the third quarter, they jumped 42% to 34 cents. The company announces earnings on Feb. 27. Analysts expect full-year profit of $1.67 a share, up from $1.03 last year.  Earnings are expected to rise another 22% to $2.04.

Oddly, Grifols’ ADRs reportedly trade at more than a 30% discount to shares traded on the Madrid exchange. That’s because the company is essentially ignored by U.S. analysts and management doesn’t play Wall Street’s investment relations game. Nevertheless, Grifols is star hedge fund manager John Paulson’s fourth-largest holding and accounts for 3.9% of his total portfolio, as well as for 5.77% of the company’s outstanding shares.

So buy Grifols SA (GRFS) at market today, and place your stop at $33.50. If you want to play the options, I recommend the May $40 calls (GRFS140517C00040000).

Finally, I will be doing an encore presentation of the talk I gave at the Investment Masters Symposium in Orlando last week on “The Myth of America’s Decline” live for the e-Money Show tomorrow, Feb. 11 at 3:00 p.m. EST. You can register for the symposium now. It will be available on demand online through Feb. 22 as well.

Portfolio Update

Bank of Ireland (IRE) added 3.71% last week. IRE has steadily been making its way back to the $18.00 mark — a recent resistance point and high. Bank of Ireland is also making this upwards move on the heels of touching down at the 50-day moving average (MA) and is likely to break through $18 to continue its gains. IRE is expected to report earnings on March 3, before markets open. IRE is a BUY.

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Apollo Global Management, LLC (APO) lost 1.69%. APO reported mixed earnings results last Friday. APO reported $1.06 per share vs. analysts’ estimates of $0.82 per share of “economic net income,” a measure that better gauges a private-equity firm’s performance. Although a big win by this measure, APO’s quarter suffered a bit due to a large drop in carried interest income, causing the tepid response from Wall Street. Total expenses were down 42% for the quarter, and assets-under-management came in at $161.2 billion, up from $113.4 billion a year earlier. APO is now a HOLD.

AbbVie (ABBV) dipped 0.69% last week. ABBV announced a new $320 million investment in Singapore to build a new drug manufacturing facility. This will provide AbbVie more production capacity in a region the company categorized as “Asia’s fastest-growing biotech cluster.” This will be AbbVie’s 13th major production facility, with the 12 others spread across the United States, Europe and Puerto Rico. ABBV is a HOLD.

Google, Inc. (GOOG) added 3.88% last week as buying Monday’s big dip proved quite advantageous. GOOG managed to close above $1,171.50 per share last Friday, making Google the second most valuable company in America — to its archrival Apple, Inc. It is no accident that the two top companies on this list essentially rule the planet’s mobile devices. It’s also a true testament to the immense impact the mobile device revolution has had on the world. Not bad for three young guys who started out simply by tinkering with technology in their college years. GOOG is a BUY.

Thermo Fisher Scientific, Inc. (TMO) also jumped 4.10% for its first week in your portfolio to hit a new high. Standard and Poor’s issued a “BBB” rating on the loan debt Thermo Fisher Scientific took on for the recent acquisition of Life Technologies Corporation. Standard and Poor’s also commented that this acquisition makes TMO the largest provider of analytical instruments, equipment and reagents for the medical device research market. TMO is a BUY.

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Latest Special Report

As a courtesy, I want to bring to your attention my latest special report, Top 4 Keys to Profiting in the New Wildfire Rally. In addition, take a look at the recently updated version of The Top 12 Stocks You Should Buy Right Now, which features three of my top investment recommendations, as well as bonus picks from each of my fellow investment newsletter editors at Eagle.

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