Pfizer Inc (PFE)

Just reported and had quite good earnings. They are reeling, of course, from the government decision to not allow the Allergan deal to go through. There is a lot of debate because the 2 companies were within the law, but the tax inversion issue is a big one, and the way it was done is leaving a bad taste in people’s mouths. Pfizer is just starting to move out of the issue of Lipitor coming off patent. It was a blockbuster drug before, but when it goes generic you see sales drop dramatically. Their pipeline has been building. This company has had basically flat revenues and earnings for 4 or 5 years, and is trading at about 20X earnings. A bit of a “show me” stock, and that goes for most pharmaceuticals. You are better off going into biotechs. Prices have come down quite dramatically, and are trading at cheaper multiples than Pharma drug companies. Have a look at Biogen (BIIB-Q) or Celgene (CELG-Q).

Very topical now because their deal with Allergan just broke. A lot of what you are seeing on the stock in the last few days is Short covering. This is a standalone company, and falls into the category of being safe, relatively stable, and pays a good yield. This is continually growing from a demographic perspective. He would wait before buying because of the Short covering. It will probably settle back in the next couple of days. You really can’t go wrong with this.

Investors have cheered on the fact that the deal is dead at this point. It has decent cash flow that will grow over time. He does not like the 14 times earnings to get a single digit growth rate. He would prefer others with higher growth rates.

Currently prefers Shire (SHPG-Q) or Roche (RHHBY-OTC). Roche as one of the best oncology programs out there. Shire has sold off because they did an acquisition which the market was concerned with.

Chart shows that this is extremely volatile. Sees some support coming in at around the high $20s. It is coming into an old level of support and there is a decent chance it could bounce off of that into the low $30s, but you are taking a chance. A very hard chart to read as there are no trends.

The nice thing about this is that it is cash flow oriented and pays a 4% dividend yield, but the stock price has been a bit rough recently. The stock is trading below its 200 and 50 day moving averages, so from a technical perspective it is not great. There are probably some synergies in earnings accretion from its acquisition of Hospira, and probably more things coming on down the road. He would stay away for the time being.

A great name. Very inexpensive and is trading with a good yield. Large cap Pharma is a great area to hide out in, with reasonable yield.

Just made a major deal for Allergan (AGN-N). There is a lot of discussion and a lot of controversy because Allergan is an Irish based company and this is very clearly a tax deal in order to lower their tax rate. The risk is that the US government will somehow block it. Traditional pharmas have really struggled because of generic drug legislation which has been on the books since the mid-1980s. Feels this is one of the best pipelines in the drug business, and the Allergan deal will be very, very accretive to it. Wait to see what transpires, even though you have to pay a bit of a higher price for greater certainty.

Likes this company and their Allergan (AGN-N) merger. Companies like this are at a disadvantage having their tax base in the US rather than in a friendlier jurisdiction. That is a fault of US legislators, who have basically said they are going to tax them on their worldwide income if US-based, but if based outside the US, they are taxed in the individual countries.

There was big merger news with this and Allergan (AGN-N) today. He prefers iShares High Dividend Equity (HDV-N). A pretty diversified basket and Pharma is about 15% of the portfolio. You are probably going to get about 4% in this ETF. Be careful with dividend names. If interest rates start moving up, it is going to have an effect on dividend payers.

They have suffered from legislation enacting generic transition of drugs they spent billions developing. You are left with a cash cow. They make their progress from cost containment rather than revenue growth. Then you speculate about their drug pipeline. Unfortunately this is not as recurring as you might think. For this reason he stays away from these pharmas.

(A Top Pick Aug 15/14. Up 17.01%.) A great company to hold in this particular market. If you are looking for shelter in the storm, this is a wonderful company to hold.

She has a couple of other names in the healthcare space. It has been going through a bit of refocusing and restructuring. It has held in quite well. There is not a lot of revenue and earnings growth because of drugs that went off patent. She would just hang onto it as it will hold up well.

This is one that he owns and hopes to own for the foreseeable future. From 2000 to 2010, this name went absolutely nowhere, but finally started moving in 2011. (See Top Picks.)

There is a pending acquisition for Hospira (HSP-N), a generic drug maker. Some think they have overpaid for this acquisition, which might have held back shares. Feels they had to do it because their long-term growth rate is looking a little weak. The other speculation is that by acquiring this, there is a potential for a spinoff, which will enhance shareholder value. Announced an $11 billion share buyback program in October. Trading at 17X forward price earnings, with a pretty low long-term growth rate. Good dividend payer at 3.25%. He is looking at possibly shifting from this into some HMOs or some hospitals, etc.