Three pharmaceutical equities to buy amid the COVID-19 crisis feature two traditional industry giants and an exchange-traded fund that offers exposure to stocks that, in many cases, are pursuing vaccines to combat the novel coronavirus.
The three pharmaceutical equities to buy amid the COVID-19 crisis steer clear of focusing solely on the top contenders for developing vaccines to protect against the deadly virus, since so many of those stocks already have jumped in price. However, the exchange-traded fund recommendation offers a way to gain exposure to promising vaccine producers as they test their prospective new drugs, while also reducing the risk of choosing would-be vaccine makers that may fall short.
Bristol-Myers Squibb Ranks Among Three Pharmaceutical Equities to Buy Amid the COVID-19 Crisis
Bob Carlson, leader of the Retirement Watch investment newsletter, said he recommends Bristol-Myers Squibb (NYSE:BMY). He first advised buying that stock on June 29 and it since has risen $57.80 to $62.41, while also paying a $0.45 per share dividend on July 2.
Carlson, chairman of the Board of Trustees of Virginia’s Fairfax County Employees’ Retirement System with more than $4 billion in assets, said Bristol-Myers Squibb incurred some problems recently, including patent losses. It also took on hefty debt last year to buy Celgene. The debt hurt Bristol-Myers Squibb’s share price and caused it to sell at a substantial discount to its value.
Income investors will appreciate that Bristol-Myers Squibb pays a “high dividend yield” of around 3.11% that looks to be safe, even after the debt payments from the Celgene deal are taken into account, Carlson said.
“S&P continued to give the company’s debt an A+ rating after the deal,” Carlson said. “The company is selling other assets and reducing expenses to increase cash flow. BMY made deleveraging and improving its balance sheet a priority.”
Celegene Aids One of Three Pharmaceutical Equities to Buy Amid the COVID-19 Crisis
Carlson, who seeks to protect the money of investors and likes to invest in equities that pay dividends, said Bristol-Myers Squibb has a history of managing mergers and acquisitions well, so it is likely to attain the cost savings and benefits it projects from the Celgene deal. Plus, Bristol-Myers Squibb has a “good portfolio of profitable drugs and a solid pipeline” of others, Carlson added.
The company has at least maintained its dividend for more than 35 years and increased it each of the last 13 years. A risk to buying Bristo- Myers Squibb today would be the possibility it would not execute its merger plan well and remain burdened with debt from the deal, Carlson cautioned.
“The risk has a low probability of being realized given the company’s history of successfully executing mergers,” Carlson said.
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The trailing, 12-month price-to-earnings (P/E) ratio of Bristol-Myers Squibb is 10.87 times earnings, compared to the Medical — Biomedical and Genetics industry’s ratio of 25.78 times earnings, according to Zacks. Thus, Bristol-Myers Squibb trades at a big discount compared to its industry peers while it tries to combine with Celegene.
Bristol-Myers Squibb announced on Aug. 24 that it entered an agreement to acquire privately held Forbius, a clinical-stage protein engineering company that designs and develops biotherapeutics for the treatment of cancer and fibrotic diseases to add a TGF-beta asset. On Aug. 17, Bristol-Myers Squibb reported an exclusive global license for Dragonfly’s interleukin-12 (IL-12) investigational immunotherapy program aimed at achieving potent anti-tumor efficacy for patients with advanced stages of cancer. That alliance still requires regulatory clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
Pension fund Chairman Bob Carlson answers questions from Paul Dykewicz in an interview before social distancing became the norm after the outbreak of COVID-19.
Pfizer Becomes One of Three Pharmaceutical Equities to Buy Amid COVID-19 Crisis
Pfizer Inc (NYSE:PFE), a New York City-based multinational pharmaceutical company, offers a 3.96% dividend yield and trades at a P/E ratio of 15.27. That P/E ratio is higher than Bristol-Myers Squibb’s P/E ratio but much lower than the 25.78 times earnings of the Medical – Biomedical and Genetics industry.
Pfizer’s size poses a challenge in achieving more than modest growth but it has the financial resources to partner with other pharmaceutical developers. One recent example of such partnership with Mainz, Germany-based BioNTech is worth citing.
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Clinical Data Lift Three Pharmaceutical Equities to Buy Amid COVID-19 Crisis
Early clinical trial data from a COVID-19 vaccine study is among those currently in late-stage testing that have shown favorable responses among participants for antibody and immune cell responses, Pfizer officials announced.
BioNTech and Pfizer reported positive results on Aug. 21 for U.S. Phase I study participants who received a trial vaccine called BNT162b2 at 30 micrograms. Study participants, aged 18-55, showed mean concentrations of antibodies against SARS-CoV-2 at 3.8 times those of convalescent patients seven days after the second dose, while those aged 65-85 showed levels 1.6 times higher.
The treatment was tolerated well with just mild to moderate fever in fewer than 20% of the participants and led to the selection of the BNT162b2 vaccine candidate for a pivotal Phase 2/3 global study of up to 30,000 participants that began in July 2020. So far, that study has enrolled 11,000 participants, including in areas with significant SARS-CoV-2 transmission.
Three Pharmaceutical Equities to Buy During COVID-19 Crisis Pay Dividend Yield
Mark Skousen, PhD, a Presidential fellow in economics at Chapman University who also leads the Forecasts & Strategies investment newsletter, features Pfizer among his choice of five Dow Jones stocks that have the lowest price among a list of the 10 highest-yielding stocks in that index. Skousen updates the list each year in the August issue of his newsletter and, since the financial crisis of 2008, his Flying Five stocks typically beats the Dow 30 Industrial Stock Index (DJIA).
However, for the first time since 2008, the Flying Five failed to outperform the DJIA. In the August 2019-July 2020 period, the Flying Five lost an average of 3%, compared to the Dow Jones Industrial Average’s 2%-plus gain. Skousen, who heads the Home Run Trader, Five Star Trader, TNT Trader and Fast Money Alert advisory services, indicated that he has noticed a pattern that when a crisis hits, such as in 2008-09 and 2019-20, the Flying Five strategy underperforms the DJIA. But when Wall Street returns to normal, the strategy beats the market and usually does so handily.
Mark Skousen, a descendent of Benjamin Franklin, meets with Paul Dykewicz.
Another fan of Pfizer is Hilary Kramer, host of a national radio program called “Millionaire Maker” and leader of the GameChangers and Value Authority advisory services. The stock’s dividend yield offers investors who like income a place to put a portion of their money to earn a much higher return than the anemic rates that banks pay depositors.
Any capital appreciation of 5-6% annually would give investors in Pfizer a pre-tax return of roughly 10%. Faster-growing pharmaceutical stocks potentially can provide superior returns, but they also carry additional risk. Kramer is not among those who want to buy shares in pharmaceutical stocks that already have run up in price in hopes of finding the ultimate top winners in the race to be the first to market with an effective COVID-19 vaccine.
ETF Is One of Three Pharmaceutical Equities to Buy Amid COVID-19 Crisis
Jim Woods, editor of Successful Investing, Intelligence Report and Bullseye Stock Trader, said two major catalysts to lift stocks would be 1) The passing of a substantive stimulus deal by Congress, and 2) A game-changing vaccine/therapeutic to combat coronavirus. The NASDAQ Composite and the S&P 500 already have “extricated” themselves from the shortest bear market in history, recovering from roughly a 30% plunge.
A danger could be that a substantive new stimulus bill of about $1.5 trillion does not gain Congressional passage or that the much-needed vaccine/therapeutic treatment is not developed as quickly as hoped, despite President Trump’s “warp-speed” project aimed at producing the desired results in record time with an expedited regulatory review.
Woods expressed concern that the process of creating, distributing and administering pharmaceuticals that can conquer a vexing problem such as COVID-19 is complex and “fraught with obstacles.”
Paul Dykewicz meets with Jim Woods before COVID-19 to discuss new investment opportunities.
As the U.S. economy continues to reopen, stocks keep rising, Woods said. To seize among that momentum and gain exposure to promising drug company stocks, Woods recently recommended an exchange-traded fund, VanEck Pharmaceutical ETF (NASDAQ:PPH), in both his Successful Investing and Intelligence Report investment newsletters. The ETF went into the Successful Investing Growth Portfolio, while it gained a place in his Intelligence Report service’s Tactical Trends Portfolio. The fund offers a trailing 12-month dividend yield of 1.64%.
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Selected pharmaceutical stocks have the potential to rise significantly due to the urgent need for solutions to serious health problems that include COVID-19, which has caused 23,889,150 cases and 819,414 deaths worldwide, along with 5,777,710 cases and 178,486 lives lost in the United States, as of Aug. 26. America has amassed the most COVID-19 cases and deaths of any country, including China, where COVID-19 first surfaced.
The three pharmaceutical equities to buy amid the COVID-19 crisis each have promising products aimed at addressing sizable markets. Investors who want exposure to the industry may find any or all these three pharmaceutical equities to buy amid the COVID-19 crisis worth adding to their personal portfolios to benefit from advances in the development of cutting-edge treatments.
Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others.