Question:
For each $100.00 of Pfizer common stock accepted in exchange offer, I would receive approximately $107.52 of Zoetis common stock. Question is should I sell Pfizer now or go through exchange?
Answer:
Pfizer, Inc. (NYSE: PFE) is a global pharmaceutical company. Zoetis Inc. (NYSE: ZTS) is a spinoff of Pfizer that develops and manufactures animal medicines and vaccines for livestock and household pets. The spin off happened in February 2013. Pfizer retained a substantial portion of the stock shares.
The initial information received on this share swap was a bit misleading in that it quoted a potential 7.52% premium achieved by the shareholders of Pfizer. However, the swap premium is a moving target as it is set to adjust with the relative movements of the shares of Zoetis and Pfizer. As an aid in making the decision, a website (http://zoetisexchange.com) has been published. This website notes the upper limit of the exchange is 0.9898 shares of Zoetis for each share of Pfizer. This will be based on the price of the shares of the two companies in the three days ending June 19, 2013. This upper limit has been met, thereby, making the premium received approximately 1% for all Zoetis shares, assuming no significant change in relative price of the shares on June 19, 2013, the deadline for the exchange.
The decision for stockholders came down to which company you wanted to own. Zoetis earnings are expected to grow at almost three times the rate of Pfizer’s earnings growth, annually, over the next three to five years. However, Zoetis does not meet Henssler’s financial criteria based on financial strength and safety. This being the case, we recommended holding Pfizer shares.
Again, this was a unique situation, as most companies automatically give you a certain number of shares in a spun off company. In this exchange offer, the stockholder had the option of holding any shares of Pfizer currently owned. This was an option to swap into shares of Zoetis.
Question:
My office is renewing our benefits and the life insurance that they’re offering us. Do I need life insurance if I’m single?
Answer:
Life insurance provides income replacement or asset protection. Being single, it is likely that no one is dependent on your income except for you; therefore, your need for life insurance is likely minimal. However, you may consider life insurance to pay for your funeral costs. Otherwise, the burden may fall to your relatives. If your parents are on a fixed income, life insurance proceeds could help pay for these expenses.
You may also consider life insurance if you have debts in excess of your assets, or if you have shared debts with someone else. Perhaps you and a sibling have a mortgage or a loan together. If you were to die, your sibling would be responsible for the entire debt. A life insurance policy naming that sibling as the beneficiary could provide the funds to cover your share of the debt.
You may also consider locking in life insurance early if you know your health might deteriorate as you get older. If you have a family history of ailments, such as, heart disease or cancer, it might be wise to obtain life insurance while you are still healthy and insurable. Also, you may not be single forever. Obtaining coverage at a young age may be both more affordable and needed in the future.
Question:
We’ve held DSW for about two years—we bought it around $40 a share. I’d like to take some profits, but my wife wants to hold for a little longer. What do you think?
Answer:
DSW Inc. (NYSE: DSW) does not meet our criteria for financial strength or safety. Considering you purchased at $40 per share and it sells for more than $70 today, you have a healthy profit in your holding. With a price-to-sales that is nearly double its five-year average of 0.77, and a price-to-book of 3.65 that is well above the company’s five-year average of 2.39, we feel the company is expensive. We agree in your assessment to sell and take the profits you have earned.
Question:
We owned Fifth Third Bancorp in the early 2000s when it was worth a lot more. We sold in 2006. Now our adviser is recommending it again. I can’t seem to wrap my head around owning a stock that went from $60+ a share to $18 today. What is its outlook?
Answer:
You cannot really compare the current price of a stock today to what it was nearly 10 years ago, as spinoffs, stock splits and valuations can change and affect the stock price. You should be concerned with where the company is today, and its outlook going forward. All things considered, the bank looks a bit expensive in some ways, but earnings are expected to grow by about 13%, annually, over the next business cycle. In our opinion, a buy seems justifiable.
At Henssler Financial we believe you should Live Ready. If you have questions regarding the your stock holdings, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at experts@henssler.com
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
