GlaxoSmithKline PLC (GSK)

North American investors have to be careful about buying European stocks. The British government is fine because they do not withhold taxes on dividends, and dividends are a big part of this company’s story, well over 5%. This has been a dog for the last 3-5 years. Brought in new management a couple of years ago, and finally they are having an effect. Got rid of their cancer division, and are now trying to rebuild that. He likes the stock because they are the 2^nd largest manufacturers of vaccines, and every year they have to redo the vaccine, so it is a drug that is not typically copied. Also, it is a mass-market drug and they can make profits on low margins.

Has a 5.5% dividend, which is nothing to sneeze at. Pharmaceutical, relative to biotech, seems to be improving. Prefers Bristol Myers (BMY-N) because their growth rate is a bit higher, but wouldn’t be negative on owning this one. He would only have a small position.

Doesn’t know this that well. Wouldn’t be his preferred choice in healthcare. Thinks the dividend is pretty secure.

Not a name he would want to own. They have more price sensitive areas of the market, so they don’t really have the ability to set prices as well as they would like. Also, has a very light R&D budget, which is something you don’t want from a pharma company. Right now they are in a joint venture with Pfizer (PFE-N) on an HIV company, and the earnings and cash flow from that are not expected for another couple of years. You might consider iShares US Healthcare ETF (IYH-N) instead.

He favours the pharmaceutical giants Navartis and Roche. Both are exposed to oncology. Lots of really positive developments going on in oncology, which is great. Changes that are going on will benefit Navartis more than Glaxo.

5.6% is a pretty good yield for pharmaceutical company. This is one of the more mature pharmaceutical companies. Probably not a takeover target, but more likely to be an acquirer. He doesn’t like the very, very big Pharma companies. They are very hard to analyse. Too subject to competition from generic companies.

The healthcare area in the US has pretty well been the best area to be invested in last year. He has cut back a little in this area. This one has not performed as well as other American drug companies. Prefers PFE-N.

This usually does quite well this time of year, but it has not been doing so well lately. The trend is on the downside. Normally the stock does well coming into January, but it is not doing it this year. There are better pharmaceutical stocks which are doing much better this time of year.

He likes the space. It is a growth industry and has been growing well. You are starting to see new drug development. Pharmas have their expenses under control. If you have a couple of pharmas then stick with them. This is a very good name. XPH-N is an ETF in this space you could use instead.

(Market Call Minute) They had issues in China with some bribery and corruption. Sales flat in 2014 and will be for 2 or 3 years.

An interesting story. One of the benefits of this company is that there is not just one big drug. They are well diversified. They are expanding their franchise into the developed world. One issue is a drug that is 20% of their revenue. When it comes off patent it could hurt them, but inhalers are difficult to make as generics.

He is not in pharmaceuticals currently. Has looked at this a couple of times, but there is not enough growth for him. Management in this type of company are out purchasing other companies. He would pass on these right now, because there is not enough underlying growth. Growing at about 2%-3% and he likes to see quite a bit more than that.

Although listed in the US, this is really a European name, but diversified across about 140 different countries. Even though they may not be as diversified as its peers, they have a pretty decent focus and mixture. Focused mainly on vaccines and drug R&D, but also have some pretty well-known consumer product brands that people are familiar with. The issue is that it is a little bit more focused on the hefty dividend payment. Payout ratio is about 70% while its peers are more like 50%-60%. Because of this the multiple is lower, and trades at a discount to the others.

No different than the other pharmas except that they moved into vaccines, which have benefited them. The great thing about the pharma stories is that they are defensive when things are difficult. Great dividend yield. Throws off lots of free cash. You won’t see the multiple expansion that they had years ago.

Their product pipeline and ability to make acquisitions are strong, despite the bribery charges. He can’t comment on them.