Abbott or GE – who is smarter?

in Stock Analysis by

I am not a buyer of Abbott Labs(ABT) at this price, as the margin of safety has been depleted by the latest stock appreciation.  But I like its latest transaction with General Electric (NYSE GE). Abbott proved to be a shrewd buyer and seller.  It played Johnson & Johnson (JNJ), Guidant (GDT) and Boston Scientific (BSX) masterfully and positioned themselves to be the “stealth” winner any way that the JNJ/Guidant or Boston Scientific/Guidant acquisition turned.

Diagnostic segment that Abbott is selling to GE for $8.5 billion generates revenues of $2.5 billion and has a 10% EBIT margin, putting a multiple of 34 times operating profits – that’s a nice fat premium – very smart on Abbott’s part.  In GE’s defense, it could probably drive some costs out of this business once it combines it with the rest of its medical business.

Tags:

Vitaliy N. Katsenelson, CFA, is Chief Investment Officer at Investment Management Associates in Denver, Colo. He is the author of Active Value Investing (Wiley) and The Little Book of Sideways Markets (Wiley). His books were translated into eight languages. Forbes Magazine called him "The new Benjamin Graham".

Leave a Reply

Latest from Stock Analysis

Apple vs Coke

Great Stock = Great Company + Great Valuation (Apple vs Coke) Valuation
Go to Top

DON`T MISS OUT!

Get the latest investment articles in your inbox every week

"Vitaliy Katsenelson is the new Benjamin Graham."

- Forbes

Tired of generic investment advice?

CUT THROUGH THE BS - JOIN 15,000 READERS

"Vitaliy Katsenelson is the new Benjamin Graham."

- Forbes

JOIN TO OUR NEWSLETTER

Tired of generic investment advice?

Sign Up for Articles

Join tens of thousands of readers