Stephanie Link's Can Kickers -- Notes on Bristol-Myers Squibb

NEW YORK (TheStreet) -- Bristol Myers Squibb (BMY) has been a stock that Jim and I have owned in the past and have been watching it as one to possibly own again. This morning it announced a $7.1 billion deal to acquire Amylin Pharmaceuticals (AMLN) as it tries to expand its diabetes franchise with partner AstraZeneca (AZN).

The deal is a smart one for many reasons - it expands its diabetes pipeline, shares the economic risk as AZN will payout $3.4 billion for a 50% share in the economics, and uses its cash ($8.6 billion in 1Q) wisely to build out its product franchise in the face of the Plavix patent cliff (which accounts for 30% of its revenues). Currently, BMY and AZN have a joint venture in diabetes with two drugs - Onglyza (which is on the market currently) and Dapagliflozin (yet to be approved by the FDA). The addition of Amylin's Byetta and Bydureon products could lead to an additional $1.5 billion in sales for this segment which could be as much as 12-20 cents accretive in 2016. It's not a layup to get to $1.5 billion in sales, but the growth in the diabetes market and the sales/marketing muscle behind BMY/AZN should make it doable.

We applaud management for building out its products and it now has one of the most diversified pipelines in the sector - cardiovascular diseases, virology, immunology, oncology, and central nervous system disorders. The only issue is that the stock is expensive - trading at 19x forward estimates which is a healthy premium to its 14x historical average and the 12.7x group average multiple. It has a great yield, a sizable buy back (it just announced a new $3 billion buy back last week) and is a defensive stock - which is attractive in this volatile macro environment. Usually when companies make acquisitions the acquirer shares typically fall - and sometimes an opportunity to buy. I doubt it will fall materially, but if it does, it's one on our radar to buy.

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Stephanie Link is the Co-Portfolio Manager of Jim Cramer's Charitable Trust Portfolio, Action Alerts PLUS Portfolio. This includes developing a macro outlook, stock selection, and daily written analysis in managing the fund and for subscribers to follow and participate. It also includes a weekly summary report of the strategy, positions and ranking of each stock in the fund. Promote the product through weekly videos independently and with Jim Cramer on the website. Strategy responsibility includes overseeing all content, talent, supervision and development of the premium website services. Appear regularly on Maria Bartiromo's "The Closing Bell", Larry Kudlow's "The Kudlow Report" and CNN affiliate The Wall Street Shuffle.