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From January 1, 1990 to September 12, 2019, Amgen stock returned roughly 22,943% versus the S&P 500 return of roughly 751%. Hows that for medical innovation being a sound investment?
— Source: Stockcharts.com

COMPANY PROFILE

Amgen is committed to unlocking the potential of biology for patients suffering from serious illnesses by discovering, developing, manufacturing and delivering innovative human therapeutics. This approach begins by using tools like advanced human genetics to unravel the complexities of disease and understand the fundamentals of human biology.

Amgen focuses on areas of high unmet medical need and leverages its expertise to strive for solutions that improve health outcomes and dramatically improve people's lives. A biotechnology pioneer since 1980, Amgen has grown to be one of the world's leading independent biotechnology companies, has reached millions of patients around the world and is developing a pipeline of medicines with breakaway potential.

For more information, visit www.amgen.com and follow us on www.twitter.com/amgen.

 

Recent Earnings

During the third quarter of 2019, the Company repurchased 6.2 million shares of common stock at a total cost of $1.2 billion. At the end of the third quarter, the Company had $3.6 billion remaining under its stock repurchase authorization.

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Opinion

From a factor scoring perspective versus the other 199 brands in the brands index, here’s where Amgen scores well as of 9/17/19:

  • 88% high dividend yield

  • 88% high free cash flow yield - a solid value metric

  • 99% high shareholder yield - shareholder benefits in the form of cash dividends, net stock repurchases, and debt reduction.

  • 95% high 1YR EPS growth

  • 96% high operating margins

  • 84% high absolute free cash flow

  • 82% high ROIC over WACC (weighted cost of capital)

  • 90% strong sales surprise last quarter

Growth isn’t a barn burner but it is pretty consistent and AMGN generates a wicked amount of free cash each quarter. In this environment, that’s a pretty wonderful, important factor and what makes AMGN a great stock right now. It’s not normally a stock I would anchor to but with the economy slowing and yellow flags everywhere, AMGN offers some stability in a portfolio. When I feel like the coast is clear, AMGN will likely be a source of funds to buy brands with better growth characteristics. For now, it’s been a great investment and appears on the verge of breaking out of the recent range.

Amgen is an 800lb gorilla in the R&D/innovation category. Extension of life is a key theme to track and it’s historically been a solid investment for consumers. Investing in Amgen for the extension of life theme is like investing in Apple for a consumer electronics allocation. Yes, these biotech brands can have lumpy sales and earnings on occasion but so long as the innovation and free cash flow generation continues, these can be great investments.

Here’s some commentary from a smart value manager, Smead Capital:

Amgen (AMGN) is a free-cash-flow juggernaut with a shareholder-friendly management team who oversees a brilliant group of scientists making great biological medicine. They not only gush huge cash flow, but their accounting actually hides their enormous profitability compared to other industries. Research and development (“R&D”) is nearly 17% of gross sales. This R&D spending is the life blood of the company’s future. However, it gets expensed up front rather than depreciated the way long-term investments are accounted for in other businesses. What this means is Amgen has great free cash flow even while a massive investment is being made in future cash flows.

Technically speaking, Amgen is a very attractive stock currently. Why? Because the stock basically went nowhere from 2000 to 2012, that’s twelve years of going sideways until the stock broke out of the 12 year base in early 2013. No one knows what happens to a stock on a day to day basis but in my 26 years experience, stocks that break out of 12 year bases tend to be wonderful investments for a very long time.

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