Tuesday, August 16, 2005

My Poorest Performing Investment - Merck

Right now, the worst performing investment in my portfolio is Merck. I made my first purchase of Merck in December of 2003. At that time, things were not looking great for pharma but I liked Merck's numbers and the fact that they had been consistently raising the dividend year after year. In fact, I ended up buying some more in July of 2004. Then the Vioxx fiasco happened and my holding dropped by half. I faced a big decision - do I hold 'em or do I fold 'em.

5 years ago I would have unloaded that stock faster than you could say "Merck Just Tanked". However, I was a more mature investor and I decided to study the facts before acting. Besides, research had taught me that stocks tend to over-shoot when the crap hits the fan and I didn't want to give up too much if I didn't need to. The facts told me that the Vioxx withdrawal would hit the company on the top line and the bottom line. Additionally, the stock was not very popular - there was more selling than buying. However, as I was watching it the stock eventually stabilized after a couple of weeks. Even more importantly, the management kept the dividend steady in a time where they could have justified a cut. This was enough for me to keep holding on - and I did. I even bought a bit more in December 2004 and have continued to reinvest dividends.

Given the cloud over the company with regards to the Vioxx lawsuits the future doesn't seem too bright and I am getting a bit antsy. The stock has not moved much but I am still receiving good dividends and am looking for a dividend increase in the foreseeable future. If this does not happen I will seriously consider selling. I am going to be patient for now, looking primarily for that dividend increase, but would like to hear your thoughts. Please comment on what you would do in this situation...

2 Comments:

Anonymous Anonymous said...

hello. great blog. here's my 2 cents -
set stop limits everytime you buy a stock.. say 15% below your purchase price. sell the losers before they get worse. It will take years and years before Merck see's $50 again.
check out www.streettalklike.com for alot of great info.

8/18/2005 10:39:00 AM  
Anonymous NYC said...

I bought merck back in the day too. That hurt!

NYC Apartments

8/18/2005 01:31:00 PM  

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