Pfizer Inc (PFE)

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.)

He is not in love with them. He likes the research pipeline. He may liquidate it down the road.

Went through their patent cliffs and will now not show much top line growth. They have a history of making large acquisitions in order to grow. They buy the pipeline, cut costs and find synergies. There is a risk that they overpay in acquisitions. She would not buy it.

The CEO obviously confused everybody by going after AstraZeneca. Because of this, there is no more of a premium towards an upside to his model price. Closed at $28.73 and his model price is $35.03, a 22% upside. 3.6% dividend yield. Overall, healthcare stocks have been doing quite well, especially drug stocks. Take advantage of this pullback.

Made a ‘W’ base in 2009/10 and then started an uptrend. Now it has been doing a bit of top building. Make sure if you own it, don’t let it go below $28 (stop loss).

Pulled back because they wanted to do a big acquisition, which was confusing to the market as they seemed willing to pay any price for the company. The market gave a thumbs down to that acquisition. His model price would have been crushed. This pullback is a buying opportunity. Model price is $37, a 22% upside.

A huge company with several drugs in the pipeline, but none of them appear to be blockbusters that are going to make a material difference. Stock valuation is pretty decent, and has a very nice dividend, but he just doesn’t see a whole lot of growth. They are preparing to split the company into 3 separate entities, but that is going to take a couple of years. (See Top Picks.)

Have been in discussions for a takeover of AstraZeneca, and he does not think this deal will go through. For them to buy, they would probably be a laggard for the next 5 years. He sees no upside for them. If this deal dies, he can see the stock ride up to $33.41.