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...


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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