Below is a chart of West Pharmaceutical Services Inc. (WST) from 1982 to 2022, reflecting Price Momentum data.
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Category Archives: WST
West Pharmaceutical 10-Year Targets
Below are the valuation targets for West Pharmaceutical (WST) for the next 10 years. Continue reading
West Pharmaceutical Services (WST) Requires Your Attention
We couldn’t help but notice that West Pharmaceutical Services (WST) is now trading at $46 a share. This is 28.86% above our investment observation on October 17, 2010, when West Pharmaceutical Services (WST) was at the $36 level.
Our recommendation of WST came after the stock price fell within 1% of the 52-week low and was at the top of our bi-weekly NLO Dividend Watch List for Friday, September 24, 2010.
Our sell recommendation of WST came on December 11, 2010. In the sell recommendation, we indicated that the stock had upside resistance at the $44 and $52 level. Our annualized return based on that sell recommendation was approximately 40% from October 17th to December 11th.
We believe that those who had bought WST on our NLO Dividend Watch List in September or our specific recommendation back in October should reconsider the merits of continuing to retain ownership of the stock. From our original recommendation of the stock to the current price, the annualized return would be a little over 50%. Putting this in perspective, the appreciation achieved so far is equivalent to 13 years of dividend income. These gains could soon prove to be fleeting based on the signals provided by the recent stock activity.
In the chart below, you will find that West Pharmaceutical Services (WST) has come off of its high of $47.96 on May 2, 2011. This activity is not dissimilar to the price activity that occurred in April of 2010. The peaks experienced in April and May could reflect seasonal activity associated with this particular stock.
While the possibility of West Pharmaceutical Services (WST) going above the previous highs is not out of the question, we’d rather opt for readers of our site to preserve the gains that have been accomplished thus far. We will have an updated NLO Dividend Watch List shortly and recommend rigorous due diligence on the new opportunities that are presented.
Sell West Pharmaceutical Services (WST) at the Market
It is now time to recommend that West Pharmaceutical Services (WST) be sold at the market. The stock has performed moderately since the Investment Observation was issued on October 17, 2010. It is highly recommended that anyone who bought the stock based on our insight should re-read the posting. For the most part, West Pharmaceutical (WST) retained the recommended market price and moved higher from there.
In the pursuit of "seeking fair profits" the returns that this stock has provided within the last 55 days say that it is necessary to consider alternative opportunities. The key to investment success and a key principle of economics is to seek the best alternatives.
West Pharmaceutical (WST) was recommended when it closed at $35.97 on October 18, 2010. Based on the most recent closing price, WST has gained 10.06% (from the $36 price.)
The annualized return on this position would be close to 60%. Selling this stock now generates a return of 5.29x greater than the amount of the dividend yield if held for a full year. Additionally, the 10.06% gain exceeds the return on a 30-year treasury purchased on October 18, 2010 by 2.56x.
Those not interested in following through with our sell recommendation can feel comfortable knowing that West Pharmaceutical (WST) is a great long-term holding with a 10.06% downside cushion since our investment observation. As the price of WST rises, it should be noted that the stock faces significant upside resistance at $44 and $52. The current strong interest in Beckman Coulter (BEC) (article link) will provide significant support of West Pharmaceutical (WST) for the next couple of weeks.
As we have indicated in the purposes and function of this site, our goal is to:
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Maximize the annual yield of each trade.
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Reduce the time between buying and selling of each stock.
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Exceed the annual yield of government guaranteed alternatives in each trade.
Investment Observations are intended to be a starting point for investigating a quality company at a reasonable price. It is hoped that after doing the background research you can buy the stock at a lower price. Ideally the stock should be held in a tax-deferred account and should not consist of less than 20% of your holdings. Personally, we prefer holding only 2-3 stocks at a time.
For a portfolio of $10,000 with a 20% position that gains 10.06%, the impact on the entire portfolio is 2.01%. This is contrasted with the same portfolio with a 5% position that gains 10.06%, the impact on the entire portfolio is 0.50%. By choosing generally conservative dividend increasing stocks at or near a new low, the odds of success are increased in your favor making the assumed increase in risk worthwhile.
Sell Recommendations are intended to deal with the short-term reality of the market. The tracking of the Sell Recommendations are the worst case scenario if you happen to have bought a stock at the time the Investment Observation was made. We aim for modest returns, therefore we are happy with 9-12% annualized gains.
It is always recommended that when selling a stock, one should not place stop orders, limit orders or orders after hours as detailed in our article "Automatic Orders Don't Provide Protection." This leaves the seller in the position of being vulnerable to the whims of the market makers. Instead, place your sell orders only as a market order during market hours. Some would complain that a market order during market hours might leave some profits on the table. However, we would rather leave some money on the table rather than have it taken away from us by the trades that are placed by institutions and market makers.
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Investment Observation: West Pharmaceutical Services (WST) at $36
Our investment observation today is on West Pharmaceutical Services (WST). On October 4, 2010, WST announced that it would increase the dividend payment for the 18th consecutive year by 6.25%. The dividend will be paid to shareholders of record on October 20, 2010.
According to Value Line Investment Survey, “West Pharmaceutical Services manufactures systems and component parts (stoppers, seals, syringe components) used in the delivery of injectible drugs. Also supplies packaging and delivery system components to food processors and makers of personal care products.”
With the stock of West Pharmaceutical Services (WST) trading around the $36.00 range, Value Line has estimated that the fair value is $42.60. This means that there exists 18.33% of price appreciation that has gone unrecognized so far. Value Line also indicates that WST is conservatively expected to increase to the $50 level with an annualized total return of 11% by 2013.
Although Value Line has a favorable fair value target on West Pharmaceutical Services (WST), we must take the most conservative fair value target that we can find to build into our expectations. The best alternative to arriving at fair value is with Dow’s Theory.
According to Dow Theory, West Pharmaceutical Services (WST) is fairly valued at $39.90. From the current price of $36.00, WST could easily rise 10.83% within the next six months. However, any price above the fair value mark should be considered as exceptional. According to Dow Theory, West Pharmaceutical Services (WST) has the following targets:
- $51.67
- $43.82
- $39.90 (fair value)
- $35.97
- $28.12
WST has been on our watch list for so long that it was sufficiently overlooked until we pulled up Edison Gould’s Altimeter and realized the technical support/resistance exhibited at the $29.28 level was too pronounced to be ignored. In the chart below, you will notice that the altimeter support level is in perfect alignment with the resistance level set from 1994 to 2004 (blue line).
Our best guess of the upside and downside targets based on the altimeter are as follows:
| Upside Targets | Downside Targets | ||||
| $39.04 | $28.96 | ||||
| $44.16 | $21.45 | ||||
| $57.12 | $12.00 | ||||
| $60.96 | |||||
The prospect that West Pharmaceutical Services (WST) could fall below the altimeter support level of $28.96 is not out of the question. Anyone interested in investing in this stock should put heavy emphasis on the downside targets as a means to measure personal risk tolerance. In our view, the price action at this stage reflects the market's assessment on whether or not this company can operate as a going concern. As investors, we should only seek to acquire WST at a price below fair value with the expectation that the stock should be sold at or above fair value. Any purchases of a stock above fair value should be considered speculation at best.