Pfizer Inc (PFE)

Likes the valuation. Trading at around 13X next year’s earnings. This has a history from 2010 to 2015, subject to a big patent cliff, where they had significant declines in revenues. They’ve filled out their pipeline. Has 140 drugs that are over $100 million in revenues. 8 are blockbusters with over $1 billion in revenues. Likes the valuation and the yield.

They’ve been focused in the last 12 months on cutting costs. Have massive amounts of consumer products and health care products and they are divesting brands. Pays a pretty good dividend. You should be able to get 10%-12% total returns on a stock like this. (See Top Picks.)

The problem is that it has a fairly thin pipeline of new drugs coming out, which is the reason they have gone out to try and make acquisitions. This now leaves them wondering where the next leg of growth is going to come from. 4%+ yield.

The US administration are hitting drug pricing. It has hurt valuations. PFE-N has been relatively passed up. It has a 50% upside potential. It has technical support at $31. If this does not hold then get the heck out. GILD-Q is more beat up and looks very cheap.

He is bullish on this. It is all about risk/reward. The company has an infrastructure, in terms of its sales force, that is unmatched. They have a very pristine balance sheet. Wonderful research and development operations. Very attractive dividend at close to 4%. It will likely outperform the Dow over the next 12-18 months.

You have to be careful of healthcare names. It looks like Trump has a bit of a target on these. Even without Trump, this company has an underwhelming pipeline of drugs that are coming through, and that is the issue that is hitting them. Trading at about 13X earnings, but its growth rate has come down to very, very low single digits. An unexciting drug pipeline is probably going to hold it back.

This had a patent cliff with Wyatt a couple of years ago, which had a lot of promising new drugs. They have a huge amount of assets overseas in cash, which they would love to bring back, but taxation rates to bring that back are very, very high. Under the Trump administration, it is expected that that is going to change and the tax rate is going to plummet, making a lot of sense for US drug companies to bring money back in, which they can use for share buybacks, acquisitions or pumping up R&D. Dividend yield of 3.96%. (Analysts’ price target is $37.42.)

Not a fan. Once they started to lose Lipitor off patent, they started to scramble with acquisitions to try to diversify their base. They haven’t come up with any huge blockbusters, and for the most part it has just been a struggling stock. They don’t generate continuing free cash flow, and the growth rate is only 2%-3%, and inflation is going to wipe that out.

Has a small position, and feels it is best of breed in the medical space. One thing he is concerned about, and why it is down today, is when Donald Trump tweets about healthcare. The volatility is there, but it is very, very cheap, and the franchise value is very strong and he likes this long-term.

This has suffered like other pharmaceutical companies from the perception that there is going to be a lot of pricing pressure and a lot of negative sentiment. With the recent change in the US, and the Trump administration poised to have a more supportive regulatory environment, this is a pretty interesting opportunity. Trading at 13X forward earnings with a dividend yield of 3.8%.

(Market Call Minute.) The Pharmas have had a little bounce, but really haven’t followed through at this point. He would have expected healthcare to be better.

It has been by far the worst industry so far this year. Clinton would have created a shift in drug pricing. There should be some relief with Trump. Very likely you will get really good tax relief in the US. It looks good here.

He is a little underweight in healthcare and wants to build that side of the portfolio, because he thinks it will benefit under a Trump administration. This one wouldn’t be at the top of his list, because their pipeline of drugs is quite boring and underwhelming. He is not expecting a ton of growth. Dividend yield of about 3.8%, which is about the only positive thing he can say. Prefers other names.

(Almost one of his Top Picks today.) This has come off along with the other pharmas. It has a great pipeline and it will continue to buy other stocks. The stock sold off because there was talk it would split itself into 2 different companies. For now, they’ve decided to keep it together, and he thinks that has hurt the stock. They have a good pipeline, and have just bought another company to help build up their pipeline. Once the election results are over and we have a better idea of what is going to happen, this is a stock you are going to want to own. The Pharma stocks are not going up right away; this is for long-term investors.

In drug stocks, downsides can be fairly severe, but in large integrated drug stocks like this, perhaps less so. This company always has a pipeline of drugs in the system. He doesn’t see a lot of downside from here, but given the industry it is in, a move of 15%-20% is not unusual. You have to have a high tolerance for volatility.