As we’ve described many times in the past, seeking specific companies at a new low inherently implies that value attributes are far greater than when a stock is trading at a new high. This has been the case with a majority of stocks that appear on our watch list.
We’ve demonstrated this in the watch list summary section of our April 27, 2012 Nasdaq 100 watch list. Furthermore, the recent acquisitions of Transatlantic Holdings (TRH) and Cephalon (CEPH) highlight our claim that quality companies invested in near the new low are the most likely candidates to be acquired by much larger companies. A perfect example is found with news from Warner Chilcott (WCRX).
Today it was announced that Warner Chilcott (WCRX) was going to put itself up for sale as a means to “…enhance shareholder value.” On the news, Warner Chilcott’s stock price rose as much as +20%. However, as a member of the Nasdaq 100 Index, Warner Chilcott appeared on our December 16, 2011 at $14.02, when the stock was within 8.68% of the 1-year low.
On Friday, April 27, 2012, WCRX closed at a price of $18.79, which was already a gain of +34% above the December 16, 2011 watch list price. Now, with WCRX trading around $22 per share, we believe that the value component of WCRX has been eliminated and recommend that those who own the stock should consider selling the principal, at the very minimum.