Merck is Still on the Downside - Avoid It

Merck (MRK), a large pharmaceutical company, has been on the price downside since it peaked in late November 2000.

In September 2004 Merck announced that it was no longer selling Vioxx, its huge selling drug for arthritis pain, and the stock plunged. The price recovered some of the loss but took another hit in August 2005 after a jury found in favor of a plaintiff in a Vioxx-related law suit.

IS MRK a buy? No. There is too much uncertainty because of thousands of law suits against the company. There is no way to accurately estimate Merck's future liability and the negative effect on its earnings. Also, its rich 5 percent dividend could be in jeopardy putting additional pressure on the stock price.

Avoid the price downside because bad things happen to stocks on the way down.