Dodge & Cox Stock Fund's Quarterly Letter

HenryTo

FYI:

https://www.dodgeandcox.com/pdf/shareholder_reports/dc_stock_summary_033108.pdf

Suomodo · Posted: Sun Apr 27, 2008 10:51 am Post subject:

I agree with diesel, I am also a bit sceptical abouth pharma stocks at these levels (P/E >10):

1) Blockbuster drugs are dead ... old coming out of patents, there are few new areas where you can find a potential for blockbuster - maybe alopecia, dementia, some magic universal anticancer drug ... not aware of any successful phase III studies in this field at the moment, aware of many failing molecules
2) Most of the business nowadays is focused on niches with extremely expansive drugs (> 1000 USD/month per patient) for small populations of patients - facing severe resistance form health insurance/regulators (e.g. biologic drugs - monoclonal antibodies against receptors, cytokines, cell structures)
3) Generic competition getting stronger even in USA, strongly supproted by politicians all over the globe
4) Improving (micro) surgery/transplant/medical devices approaches competing for the medical treatment of various diseases (e.g. PTCA with dilutive stents for coronary artery disease)

My investment approach in this field would be small inovative companies with at least finished strongly positive Phase II studies in perspective niches, e.g. http://www.cosmopharmaceuticals.com/

Concerning Big Pharma - As a value investor I would like to see a real strategy to overcome the above mentioned issues on the horizont, otherwise they can go the way of Glaxo

http://www.ariva.de/chart/index.m?secu=4236&zeitraum=8&kx=s&boerse_id=1

I own Roche and Cosmo

nodoodahs · Moderator Joined: 06 May 2005 Posts: 2408

"Difficult years" for a team parallels to "difficult years" for a trading system or philosophy (sm.cap.value, growth, etc.). If the system/philosophy/team is sound, the "difficult year" is usually a "buy signal."

The problem is accurately assessing whether or not the system/philosophy/team is sound ...

Shocked

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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

reidbrownfield · Senior Poster Joined: 13 Jun 2005 Posts: 105

This fund recently reopened. The management is outstanding. However, this year has been a difficult one for the team.

Reid

diesel · Posted: Sun Apr 27, 2008 1:44 am Post subject:

Personally, I see pharmaceuticals as more of a value trap than a bargain due to uncertainty around drug approvals by the FDA and upcoming patent expirations. Most stock picking services have been going on about PFE etc for many years now highlighting valuations.

The only healthcare sector I would touch is the medical equipment sector i.e. an example would be STJ due to the increasing prevalence of heart disease caused by demographic trends and the western diet.
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All cats are gray in the dark.