A Drug Stock To Buy Now
The Dynamic Wealth Report
January 7, 2009
Profit From The $2.2 Trillion Healthcare Market
Just a few weeks ago I
started buying for my own account. I sensed a bottom might be forming in the
market. I didn’t time it perfectly, but I’m up on these investments so far.
Back in December I wrote about one of my picks. If you missed that article you
can check it out here (What
I'm Buying Now).
I was noticing stocks were cheap. Cheap enough for me to start dipping
my toe back in the water.
Now this is very important. Note I didn’t say I was going all in. I
didn’t say I’m 100% back into the market. I’m dipping my toe in. I’m buying a
little here and a little more there.
I’m slowly redeploying cash I have on the sidelines.
I’m looking for good positions, and picking my entry spots carefully.
With stocks being undervalued, now’s the time to start buying good quality
companies to hold for the long term.
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The stocks I’m looking at are name brand companies. Companies I have no
doubt will survive this recession… and the next. Companies that will
thrive and grow over the next 5, 10, or 15 years.
Now, I’ll admit this investment strategy isn’t for everyone. You need to
have a long term time horizon.
Right now we’re in a value market.
That means professional investors are focusing on the valuation of
companies. They’re gobbling up the ones that are undervalued. Those are
the companies that will show the biggest returns over the next few
years.
This is the kind of market “deep value” investors love to play in.
Enough about why we’re buying. Here’s what I’m buying…
I picked a major player in the Pharmaceutical industry. It was an easy
choice. Just look around. Everyone’s living longer, healthier lives.
Medical technology’s extending our lifespan.
Just look it up.
A couple short centuries ago the average man was lucky to live to see 30
years old. Now, it’s a great tragedy if someone dies at that age.
With everyone living longer lives, it means more money being spent on
healthcare.
As a matter of fact, Americans spent $2.2 trillion dollars on healthcare
in 2007. That’s an average of $7,400 per person. Prescription drug
spending increased to $227 billion in 2007.
Wouldn’t you want to capture that spending for yourself?
I know I would… and I do now. A few weeks back I started buying shares
of Pfizer (PFE). Now, the growth in healthcare spending isn’t my only
reason.
I also like Pfizer for their balance sheet.
They have more than $26 billion in cash and short term investments. Plus
another $8 billion in long term investments. All of their long and short
term debt amounts to about $16 billion.
They’re sitting on a cash cushion of more than $18 billion.
But that’s not all. Last quarter the company generated more than $3.9
billion in cash. As a matter of fact, in the last 12 months the company
produced more than $15 billion in cash flow.
What’s not to love about that?
Now I’ll admit the business isn’t perfect. There are concerns over the
pipeline of new drugs, and the recession is impacting current sales. To
me, these are short term issues. These are problems management will be
solving.
On top of a great business, we also get a solid dividend.
Right now the company’s paying $0.32 per quarter. That’s about $1.28 per
year per share. It’s a robust yield of just over 7%.
I took up a position in Pfizer a few weeks ago. It’s given me a small
gain of just over 4%. Not bad for a few weeks, but remember I’m not in
this for a quick flip. This is a long term hold for me. Take a look at
your portfolio. Pfizer might be a good fit for you as well.
•
Wheat ($6.45 per bushel)
Wheat’s been climbing steadily over the last few weeks. We’re now above
prices last seen in October. News out of India indicates the country’s
strategic wheat stocks will be well above required levels of 4 million
tons.
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