Three big biopharmaceutical stocks to buy are bearing fruit due to their strong product pipelines.
The three big biopharmaceutical stocks to buy shine amid their peers even though that sector’s performance has been “underwhelming” compared to the broader market with the S&P 500 up 13.90% vs. a 6.08% drop for the biotech year to date, according to a recent BofA Global Research report. The reasoning is that sector rotation has put biotech at a disadvantage against a better macro-economic scenario of a “soft landing,” according to the report.
The focus for investors interested in exposure to big biopharmaceutical stocks is a company’s strength of “commercial execution,” versus macro risks, BofA wrote in its research note. With third-quarter earnings season about to start, biopharmaceutical companies with promising products should stand out.
Despite market headwinds of ongoing food and energy inflation, an expanding auto strike and diplomatic challenges in the Middle East, Ukraine, Russia and Iran, the market is trading better than most observers would expect, Perry recently wrote to his Cash Machine subscribers. It also explains why investors with a collective $5.5 trillion are content to collect 5%-plus in guaranteed short-term cash instruments and Treasuries, he added.
Paul Dykewicz interviews Cash Machine investment newsletter leader Bryan Perry.
Three Big Biopharmaceutical Stocks to Buy and Why
The three big biopharmaceutical stocks to buy offer both dividends and a chance for capital appreciation. Perry, who currently averages a dividend yield of 10.8% with Cash Machine’s 29 recommendations, recently wrote that investors can take heart that the Personal Consumption Expenditures (PCE) index data released by the U.S. Bureau of Economic Analysis on Sept. 29. The data showed overall inflation dipping below 4% on an annual basis. When excluding volatile food and energy prices, the latest rise in the key inflation gauge of the Federal Reserve was just 0.1%, a 3.9% increase from the same time span last year.
Three Biopharmaceutical Stocks to Buy: Eli Lilly
Indianapolis, Indiana-based Eli Lilly & Co. (NYSE: LLY) is one of three big biopharmaceutical stocks to buy that are buoyed by their product pipelines.
The stock gained the attention of co-editors Mark Skousen, PhD, and Jim Woods of the Fast Money Alert trading service that features recommendations of both stocks and options.
Mark Skousen, head of Five Star Trader and scion of Ben Franklin, talks to Paul Dykewicz.
Lilly makes a diabetes shot called Mounjaro that company management is hoping will gain Food and Drug Administration (FDA) approval later this year as an obesity treatment. Lilly’s leaders also discussed working on a next-generation diabetes and weight-loss drug called Retatrutide.
Strong revenue and earnings growth of LLY, along with the promise of millions in additional revenue each quarter for its next-generation weight-loss drug, has the stock surging. During the past 52 weeks, shares are up 87.40%. Lilly’s price performance puts the company’s shares in the top 2% of all stocks on a relative price strength basis.
As shown by the chart below, LLY shares are on a tear, up some 7.12% in the past month and breaking out to new highs on a bullish cup-with-handle pattern. That performance bests its industry, which is down 1.44% in the last month.
Paul Dykewicz meets with Jim Woods, head of Intelligence Report.
The co-leaders of the Fast Money Alert trading service profited from Lilly last year. the duo produced a 11.06% total return in barely five months on October 17, 2022, after its recommendation on May 16, 2022. Now, they are looking to cash in again.
Chart Courtesy of www.stockcharts.com
BofA recently increased its price objective for Lilly to $700 on the back of its clinical and commercial success, with the bullishness based on tirzepatide’s likely approval in obesity during the fourth quarter this year and the company’s incretin pipeline featuring orforglipron and retatrutide. Plus, Lilly has been putting its cash to work with a slew of mergers and acquisitions (M&A) activity, including acquisitions of Versanis, Sigilon, DICE and POINT Biopharma, which BofA wrote investors seem to view favorably.
Three Big Biopharmaceutical Stocks to Buy: Bristol-Myers Squibb
BofA also has a “Buy” recommendation on Bristol-Myers Squibb (NYSE: BMY), of Princeton, New Jersey. Heading into the third quarter, commercial performance from core products such as Opdivo and Eliquis, as well as nine significant new product launches, likely will be top of mind for most investors, BofA opined.
While solid growth from Opdivo, up 13% year over year (y/y), Eliquis, rising 8% (y/y) and the Big 9 new launches, soaring 80% (y/y), is expected, BofA wrote it will take the company a few more quarters for Camzyos and Sotyktu to reach an inflection point. Further, cell therapy products like Abecma and Breyanzi likely will continue to face headwinds from manufacturing and supply in the third quarter, BofA wrote.
BofA wrote that it continues to view Bristol’s shares as attractive, given its robust new product cycle and reasonable valuation of 8x forward P/E, compared to 16x for its peers. The investment firm reiterated its buy rating and $80 price objective on BMY.
Skousen previously recommended Bristol-Myers Squibb profitably in his TNT Trader service that features both stocks and options. In less than two months after he advised its purchase on December 10, 2019, he told his subscribers to take a profit. His related call option recommendation turned a profit, too.
Chart Courtesy of www.stockcharts.com
Three Biopharmaceutical Stocks to Buy: Merck
BofA wrote the Merck & Co. Inc. (NYSE: MRK), of Rahway, New Jersey, is poised to deliver another solid commercial third quarter, driven by strong growth from core products such as Keytruda and Gardasil. Indeed, BofA wrote it expects robust growth of Keytruda in 3Q, spurred by recent approvals in adjuvant lung, continued market penetration and solid data updates.
The investment firm expects strong demand, aided by increased supply due to new manufacturing capacity in 2023/24. Looking forward, BofA forecast investors likely will focus on FDA approval and launch of sotatercept in the first half of 2024. BofA added that market uptake could be robust, given the close-knitted community and treatment centers.
“Ultimately, we remain bullish on MRK shares, given its strong core business,” BofA wrote in a recent research note.
BofA reiterated its buy rating on Merck and set a price objective of $130 per share.
Chart Courtesy of www.stockcharts.com
Three Biopharmaceutical Stocks to Buy: Stocks or Funds?
Another keen observer of the industry is Bob Carlson, a pension fund chairman who also heads the Retirement Watch investment newsletter that features a variety of portfolios. As a risk-averse pension fund leader, Carlson favors funds to enhance diversification and reduce risk.
“I still believe biotech and pharmaceuticals will do well, though they haven’t done well recently,” Carlson told me. “The companies continue to develop new, innovative products.”
Bob Carlson, head of Retirement Watch, gives an interview to Paul Dykewicz.
For a broad-based exposure to biotechnology, consider the ETF iShares Biotechnology (IBB), Carlson advised. The fund tracks the ICE Biotechnology Index, which is composed of U.S.-listed companies. It owns mostly large and mid-cap companies, though about 20% of the fund is in small and micro-cap firms.
IBB recently had 261 stocks, but 56% of the fund was in the 10 largest positions. Top positions were Amgen, Vertex, Regeneron, Gilead Sciences and Seagen. The turnover rate is only 13%.
The fund lost 13.69% in 2022 and is down 6.68% so far in 2023. It lost 4.51% in the last three months and is up 2.54% over 12 months. The dividend yield is around 0.25%.
Three Biopharmaceutical Stocks to Buy: ETFs Offer Alternative
Investors who want to focus exclusively on pharmaceuticals can consider First Trust Nasdaq Pharmaceuticals (FTXH).
The fund tracks the index in its name. About 55% of the fund is in stocks that Morningstar classifies as either giant or large. The stocks in the ETF also on average sell at lower valuations than other health care companies. Almost all the companies are listed in the United States.
FTXH recently owned 50 stocks, and its 10 largest positions were 56% of the fund. Top holdings were AbbVie, Johnson & Johnson, Merck & Co., Pfizer and Bristol-Myers Squibb. The turnover ratio is 76%.
The fund gained 2.55% in 2022 but is down 4.57% so far in 2023. It slid 0.24% in the last three months but rose 7.07% in the past 12 months. Its dividend yield is around 1.67%.
Three Biopharmaceutical Stocks to Buy: Political Risk
The Hamas attack of Israel that triggered a war and Russia’s sustained invasion of Ukraine remain a big factor in keeping lifting political risk for investors. Political risk could rise further after the Russian Defense Ministry released documents recently indicting its military spending could rise by more than 68% in 2024 to reach $111.15 billion. That amounts to about 6% of Russia’s gross domestic product (GDP), more than the country’s spending on social programs, according to Moscow Times. Russia’s military spending is set to total about three times more than education, environmental protection and health care spending combined.
The three big biopharmaceutical stocks to buy offer the appeal of both income and potential capital appreciation. Dividend-paying biopharmaceutical stocks should have extra staying power for investors willing to buy shares in them.
Paul Dykewicz, www.pauldykewicz.com, is an award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at StockInvestor.com and DividendInvestor.com. He also serves as editorial director of Eagle Financial Publications in Washington, D.C. In that role, he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other reports. Previously, Paul served as business editor and a columnist at Baltimore’s Daily Record newspaper and as a reporter at the Baltimore Business Journal. Plus, Paul 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 uplifting book is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many other sports figures. To buy signed and specially dedicated copies, call 202-677-4457.