Pfizer Inc (PFE)

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.

Has been a sleepy pharma stock. He likes it because of a big hoard of off-shore cash and they announced a deal in February that will give them a lot of synergies and allow them to grow earnings. He thinks breaking up the company will bring out value as well.

This has a decent dividend yield. The problem is, it is such a competitive business. It is so expensive to get new drugs across the finish line. He looks at them as sort of yield substitutes. If you want to buy for growth, you look at the biotechs.

A pretty good name. There are some bellwethers in it and you can’t really go wrong. US healthcare is one of the few areas that is in a secular bull market. Chart shows a volatile upward trend from October. There is some pretty good support at around $33, which is where you could buy it.

An inexpensive stock trading at around 10.5-11 times earnings, but just doesn’t have any earnings growth. Not an exciting stock.

Announced their acquisition of Hospira, which is going to be good for the company. Like all large cap pharma, they have gone through a period where their drugs were going off patent, so there was not a lot of top line growth. Have been selling off some of their major divisions. There has been no earnings growth for the last few years. Because healthcare is an attractive industry because of demographics, it is starting to look a little interesting. An attractive yield.

If you look back 4-5 years at any of the major pharmaceuticals, their revenues have not grown a nickel. This is because they spend an incredible amount of money on R&D. Then, because of legislation in the US, they go off patent and they lose a big piece of their revenue stream. This one is a cash cow because it produced a lot of cash that it paid out in dividends. In a low interest-rate environment, people were looking for dividends and yield. Long-term, this is misguided from a business growth and development standpoint.

He loves the drug stocks. His model price is $32.37, an upside of 13%-14%. This is neither a big gainer nor a big loser in this current correction. Pays a 3.65% dividend yield. (See Top Picks.)