Eli Lilly & Co. (LLY)

He owns Novo but Eli Lilly is a great company in the sweet spot of an obesity drug and other drugs as well. It has done well for the last little while. Manufacturing drugs is not easy and takes lots of time from approval to production. It is a huge franchise and can grow quite a lot.

Owns this and competitor Nvo Nordisk, but prefers LLY. The weight-loss drugs have more potential than only weight loss, as they move from injectibles to pill form. The drug hasn't plateaued yet. It's the only drug stock that has performed like the Mag 7.

He, too, was looking at defensive healthcare names to avoid tariffs. But not this one. Earnings and cashflows have exploded on weight loss, but so has the valuation. Competitors are coming. Lots of pressure in US to reduce drug prices.

Consider ABT or ALC.

Long term, secular growth of anti-obesity drugs is still strong. More diversified than NVO, which he sold on a stop loss.

Loves the space and its total addressable market. But the market can get ahead of itself, and this name's trading ~50x earnings. Extremely expensive for a pharmaceutical, built in a lot of future success. He'd look for second-derivative opportunities like AMGN.

It reports Thursday. He needs to hear more details before stepping in

The question was on buying the stock, LLY, or buying the single stock ETF for Eli Lilly which is LLYH. High income and single stock ETF's are somewhat new to the Canadian marketplace. This type of ETF is a way for Canadians to own a U.S. stock listed on the TSX. With LLYH you get exposure to LLY on a Canadian exchange as well as monthly cash flow from options they write on it. So basically it is an individual stock with an option strategy. Also the ETF is a lower priced Canadian product with tax implications. LLAT is the same thing but with more leverage. You give up some upside on the stock but get a big cash flow.

Greatest growth potential of any company in the drug space. Stock's well priced. Rumours of pill for weight loss instead of injection. Other drugs to target elusive cures. Nibble here, buy more if it goes down, buy more if it goes up -- a 5-10 year play.

Exited NVO based on stop losses. Market had high expectations, and efficacy numbers came in weaker than anticipated, sold off. LLY is outperforming NVO at this point. NVO is a bit more leveraged to the weight-loss-management drugs, whereas LLY is more diversified.

LLY has strong technical indicators, with 200-week and 200-day MAs moving higher. Still shows strength within his quant screens. Trading at 35x forward PE, with 28-29% growth rate -- pretty impressive; PEG ratio rather low. Dropped below 200-day MA, but that might be temporary. Both names have beta, but likes them long term.

Now. This morning, competitor Novo Nordisk announced a competitive new drug, but it disappointed the public. This left LLY best in class. Shares rose 1.35% today, though he thinks it should have gained more.

The top stock in this sector, though has pulled back 20% since its August high. It got hit hard after reporting a weak quarter, missing and cutting full-year guidance, then hit again after the election with the perception that the new White House doesn't like weight-loss drugs. The street read their quarter that demand for its weight-loss drug was impaired, but he disagrees--there's no problem with demand, just a supply issue. Now, is a buying opportunity.

Don't buy here, even though valuation's come down. Big winner over the last 2 years. High profile, but single drug. Will start to face competition. New US administration may cause uncertainty. He'd rather pick up the laggards on cheap valuations. See his Top Picks.

Fantastic company. Leader in diet boom. Very high valuation - would recommend buying on weakness. 

He continues to hold. 35x forward PE, 20% growth rate. Earnings and guidance somewhat disappointing. Long term, tremendous growth in obesity-treatment market and diabetes. Short term, watch technicals. Dipped below 200-day MA, but up $13-14 today. If it bounces here, may be attractive for new or additional money.

Got stopped out recently at $840. Below 200-day MA. RSI versus the market has rolled over. Backdrop for the pharma sector is behaving very poorly. He's going to wait and let the traffic clear.