Opinions
Dean Orrico
Bristol Myers Squibb
BMY-N
COMMENT
Oct 11, 2016
Stock price when the opinion was issued
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Was a laggard in the space, which you don't want to chase in and of itself. Often you want to buy strength, best in breed. If you look at the dip in the chart right after he bought, it shows you the danger of going down the food chain in a sector that's doing quite well.
He's holding on and would buy today.
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.
One of his larger pharma weightings. This is a high quality stock, and is more attractively valued than it was 6 weeks ago, even 6 days ago. Pays an attractive dividend of over 3%. Well capitalized, but has had some challenges with its cancer drug Opdivo. However, that corner of their products is only about 5% of the demand for this class of drugs over time. About a 3rd of a stocks’ value is the markets’ bet on the future product flow, and the best way to understand that is to dig in and look at the patents. Doing this, you are paying about half as much for the future product flow when buying this company versus the typical drug stocks.