The Food and Drug Administration recently approved Allergan’s (NYSE: AGN) Latisse, a treatment for hypotrichosis (sparseness) of eyelashes.
Small eyelashes are far from a small market – the global market is around $3.7 billion. But Allergan is going to have a hard time capturing much of that market in this economy, considering the drug will run $120 a month. Beauty treatments are often among the first things to be cut when paychecks are in jeopardy.
But the economy will eventually rebound, and Allergan could ultimately hit its target of $500 million per year in sales once vainness returns. By comparison, Allergan is expecting nearly $1.3 billion in sales from Botox this year.
Ironically, Latisse was originally designed to treat glaucoma and is sold under the brand name Lumigan, but the longer eyelashes were discovered as a side effect. It’s not uncommon to have the same active ingredient sold under two brand names. For instance, Viagra is also sold as Revatio, a treatment for pulmonary arterial hypertension.
Being dependent on discretionary spending, Allergan is likely to continue to tread water until the economy improves. But investors thinking about the long term don’t really need to worry about their mascara running – they can ride the waves without crying.
Ask the Fool
Q: What does a mutual fund’s “NAV” refer to? – G.B., Fresno, Calif.
A: It’s “net asset value,” the per-share value of a mutual fund.
First off, know that mutual fund prices don’t fluctuate during the day. Since funds are composed of many different securities, fund companies wait until the end of trading each day and then add up the current market value of all their holdings. They next subtract the fund’s expenses for the day, such as commissions paid. The result is divided by the number of shares of the fund that exist. Voila – the NAV. Learn much more about mutual funds at www.fool.com/mutualfunds/ mutualfunds.htm and www.ici.org.
Q: I’m a teenager. How should I invest my money? – C.T., Bloomington, Ill.
A: Well, money for college shouldn’t be in stocks, as the market could drop in the short term, as it recently has. Long-term investments can patiently ride out downturns, so consider parking money you won’t need for five or more years in stocks. Short-term investors should stick to safer plays, like money market funds or CDs.
You’re smart to start young. Let’s say you’re 14, you invest $500 in a stock index fund, and it earns the market’s historical average annual rate of 10 percent. In 30 years, when you’re only 44, it’ll be $8,725. Sock it away until retirement at 65, and it’ll be nearly $65,000. Add to it over the years and you’re looking at early retirement as a millionaire!
Learn more at www.brasscu.com, www.teenanalyst.com and www.Fool.com/teens, or in our book “The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of” by David and Tom Gardner with Selena Maranjian (Fireside, $15).
My dumbest investment
In January 2001, I was relatively new to investing. I bought into Koala Corp., which makes those baby changing stations you see in restrooms. I re-upped twice as it fell, thinking the stock kept looking cheaper. My total investment: $1,300. The company was operating at a loss, but a lot of companies were at the time. Management sounded optimistic, and I was hopeful. The price kept falling until I sold on the day it declared bankruptcy, ending up with just $42. Of course, after such a costly lesson, I tried to dissect the company and figure out what went wrong. I was amazed how bad its balance sheet looked, with skyrocketing inventory, ballooning debt and little cash. I now take management’s words lightly, especially if they sound too optimistic. Trust but verify. And I pay attention to debt. Cash flow problems can eat you alive if you’re highly leveraged. – T.D., online
The Fool responds: The tuition was costly, but you learned a lot! Be especially careful with unprofitable companies. Koala trades for less than a penny per share now.
If you were going to give something up for Lent, what would it be?
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