Amgen broke out to an all-time high today, which is quite a feat for a $70 billion market cap biotechnology company that has had numerous strong rallies over the past 20 years. Amgen is one of the few stocks in this market which I view as a good long-term hold, a stock that has an attractive valuation and secular tailwinds at its back. It has a 2% dividend yield, is projected to grow earnings 12%, and is priced at a trailing p/e of 15x, quite cheap in the context of its earnings growth rate. And you get all that for a stock that has not had an annual earnings decrease in the past 10 years. In other words, about as safe as you can get.
The long-term chart shows the importance of the $80 area. Here is the 20 year monthly chart:
The $80 level acted as resistance during the last 2 bull markets in AMGN, and the stock finally broke 80 convincingly last year. In the past 6 months, the stock has traded between 80 and 90, and finally broke above the 90 level today on increasing volume. Here is the 1 year chart:
Now that the stock has broken above 90, what’s the trade?
I prefer to see how a stock acts on a long-term breakout like this one. If the stock continues to run higher, that adds confirmation to the breakout. At that point, I would hope for a pullback to near the $90 level for a long entry. For now, it’s a wait and see, with the thought that a fat pitch might develop in the future.
Of course, that’s a trader’s mindset. For a long-term investor, this is probably a decent stock to put away in the drawer and forget about. One of the few in this market where that description fits.