Opinions
Karl Berger
Bristol Myers Squibb
BMY-N
DON'T BUY
Dec 05, 2012
Stock price when the opinion was issued
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Stock has been hot since the summer when the new CEO took over, then they got approval for their schizophrenia drugs. (Abbvie's drug failed last month.) But BMY has fallen 9% in the past 4 weeks--maybe because of concerns over the group, not the stock. Trades at only 7.9x PE 2025, and pays a 4.4% dividend which just increased last week. The stock is dirt cheap.
It's turned around in the last 6 months under the new CEO, rallying 40%. In the face of expiring drug patents, they launched a revolutionary schizophrenia drug. He also likes the rest of their pipeline to treat cardiovascular disease and oncology. He bought shares late last year.
They have huge oncology franchise, but face a huge patent cliff. But they have a some promising drugs. He owns this partly for the 5.6% dividend. He took shares off the table when the stock spiked earlier this year, but at current levels, he's watching the price go lower before buying again.
There are headline risks with any of the pharma stocks and this is not an area that he gravitates to despite the fact the dividends are reasonably solid, have been paid for some time, and would likely be paid for some time. Issue for many of the big pharmas is the risk of the shift away to generic drugs and the lack of growth prospects that result from that dynamic.