The accompanying table presents an overview of big pharma companies, presented in descending order by market cap. My favorite play in the space remains to be Pfizer (PFE), which I have written about previously and finally bought shares today at $17.90 with a dividend yield exceeding 7%. Despite growth concerns and looming generic competition for Lipitor in late 2011, I bought shares of Pfizer today as a value pick and turnaround play which operates in a defensive sector with a strong balance sheet. Also, the Company is aggressively cutting costs and buying back its shares on the open market.
Despite weakness in most of the 14 big pharma stocks presented in the table, it is unlikely that any will be lobbying Congress for subsidized loans or be the next big Wall Street firm to fail given their strong balance sheets and the necessity of their products to many people. The only companies posting stock price gains over the past year include Abbott Labs (ABT), Johnson & Johnson (JNJ), and Teva Pharma (TEVA) with an average loss of 15.6% for the entire group. I like Pfizer as a turnaround value play since its 7% dividend yield is twice the group's average and it also trades at a discount to the average price-sales ratio [PSR] and forward price-earnings [PE] ratio for the group.
$68.55 (09/24/08)
