Big Pharma: Buy a basket of drug pushers

This is one sector that I feel it is worth spreading around your capital over 4 companies or so. Because of the massive R & D costs and the uncertainty of regulatory approval and/or late recognition of unacceptable adverse drug reactions, profits from big Pharma can be "lumpy".

The best approach IMHO is to put together a basket of companies' shares who have the following characteristics:

1. large cap (> 10 Billion) with global footprint and hopefully non-US HQ
2. big product pipeline (number of drugs/products coming soon for regulatory approval as well as those that are undergoing evaluation in RCTs)
3. piles of cash and no debt if there is a deficient pipeline, so acquisitions can compensate
4. favourable fundamentals i.e. 5 year low P/E P/B P/FCF
5. a generous dividend (at least 3%)

my favourites are (in no particular order): GSK, SNY, AZN, BMY, SGP, PFE, NVS

I own shares in GSK, SNY, BMY and have a bid on SGP.


Gurufocus has something to say about this topic:

Healthcare Stocks at 52-Week Low: GlaxoSmithKline plc, Novartis AG, UnitedHealth Group Inc, AstraZeneca PLC, Amgen Inc.
GuruFocus News

The S&P500 dropped only slightly last week, although that didn’t stop Pharmaceuticals to plunge deeper into their 52-week lows. Last week’s top five stocks that reached their 52-week lows were GlaxoSmithKline plc, Novartis AG, UnitedHealth Group Inc, AstraZeneca PLC, and Amgen Inc.

Last week’s top two out of favor industries were the Technology Hardware and Equipment industry and the Pharmaceuticals and Biotechnology industry. 93 stocks in the Technology Hardware and Equipment industry have reached their 52-week lows, while 3 have reached their 52-week highs, giving the Technology Hardware and Equipment industry a low/high ratio of 31. 79 stocks in the Pharmaceuticals and Biotechnology industry have reached their 52-week lows, while 4 have reached their 52-week highs, giving the Pharmaceuticals and Biotechnology industry a low/high ratio of 19.75.

Last week’s 52-week lows included many pharmaceutical companies, and all the companies in this article are in this industry. For more information about guru stocks at 52-week lows and more, click here: http://www.gurufocus.com/52weeklow.php.

GlaxoSmithKline plc (GSK) Reached the 52-Week Low of $41.44

The prices of GlaxoSmithKline plc (GSK) shares have declined to close the 52-week low of $40.85, which is 22.3% off the 52-week high of $59.98. GlaxoSmithKline plc is owned by 9 Gurus we are tracking. Among them, 4 have added to their positions during the past quarter. 3 reduced their positions, and two left them unchanged. 1 guru sold out his holdings.

GlaxoSmithKline plc engages in the creation, discovery, development, manufacture, and marketing of pharmaceutical and consumer health-related products. GlaxoSmithKline plc has a market cap of $109.76 billion; its shares were traded at around $40.8499 with a P/E ratio of 10.78 and P/S ratio of 2.42. The dividend yield of GlaxoSmithKline plc stocks is 6.1%.

Many pharmaceutical companies have raised the prices of their drugs. GlaxoSmithKline PLC lifted the prices of six drugs, including its seizure treatment Lamictal and antidepressant Wellbutrin.

Richard Snow owns 193,939 shares as of 12/31/2007 , an increase of 16.95% from the previous quarter. Dodge & Cox owns 77,757,166 shares as of 12/31/2007 , which accounts for 3.1% of the $126.23 billion portfolio of Dodge & Cox. Tweedy Browne owns 1,136,732 shares as of 12/31/2007 , which accounts for 2.36% of the $2.43 billion portfolio of Tweedy Browne CO LLC. Ruane Cunniff sold out his holdings in the quarter that ended on 12/31/2007 .

Most notably, legendary investor Warren Buffett bought 1,510,500 shares in the quarter that ended on 12/31/2007 , which is 0.11% of the $68.77 billion portfolio of Berkshire Hathaway.

Novartis AG (NVS) Reached the 52-Week Low of $48.5

The prices of Novartis AG (NVS) shares have declined to close the 52-week low of $47.05, which is 17.4% off the 52-week high of $60.36. The company provides healthcare solutions that address the needs of patients worldwide. Novartis AG has a market cap of $106.54 billion; its shares were traded at around $47.05 with a P/E ratio of 9.17 and P/S ratio of 2.82. The dividend yield of Novartis AG stocks is 3.1%.

Novartis AG is owned by 8 Gurus. Among them, 3 increased their positions, 2 left them unchanged, and 3 decreased their holdings in the company.

Novartis said outsourcing played a role in cutting $700 million of cost between 2006 and 2007. Some investors may worry that all Novartis is doing is using its strong balance sheet to keep them happy as it struggles against a growing list of problems that threaten to stagger sales and earnings growth.

Charles Brandes owns 1,674,144 shares as of 12/31/2007 , an increase of 414.33% from the previous quarter. Dodge & Cox owns 77,541,650 shares as of 12/31/2007 , which accounts for 3.34% of the $126.23 billion portfolio of Dodge & Cox. Irving Kahn owns 183,368 shares as of 12/31/2007 , which accounts for 1.69% of the $590 million portfolio of Kahn Brothers & Company Inc. Edward Owens owns 12,019,880 shares as of 12/31/2007 , which accounts for 2.71% of the $24224.48 billion portfolio of Vanguard Health Care Fund.

UnitedHealth Group Inc. (UNH) Reached the 52-Week Low of $37.19

The prices of UnitedHealth Group Inc. (UNH) shares have declined to close the 52-week low of $37.19 , which is 25.9% off the 52-week high of $59.46. The company provides healthcare services in the United States . It has a market cap of $46.54 billion; its shares were traded at around $37.19 with a P/E ratio of 10.87 and P/S ratio of 0.64. The dividend yield of UnitedHealth Group Inc. stocks is 0.1%.

UnitedHealth Group Inc. is owned by 13 Gurus. Among them, 3 increased their positions in the company, 2 initiated positions, 1 left them unchanged, and 7 reduced their holdings in the company.

UnitedHealth Group Inc. said its first-quarter and full-year results may be pressured, but says that so early on in 2008, there may not be enough results to jump to a conclusion. The company dropped almost 20% in two days after its competitors outperformed it.

Robert Olstein bought 554,000 shares in the quarter that ended on 12/31/2007 . George Soros bought 9,347 shares in the quarter that ended on 12/31/2007 . Dodge & Cox owns 17,859,862 shares as of 12/31/2007 , an increase of 58.84% from the previous quarter. Ronald Muhlenkamp owns 1,954,580 shares as of 12/31/2007 , a decrease of 20.61% of from the previous quarter. Wallace Weitz owns 3,569,172 shares as of 12/31/2007 , a decrease of 46.92% of from the previous quarter.

Most notably, legendary investor Warren Buffett owns 6,000,000 shares as of 12/31/2007 , which accounts for 0.51% of the $68.77 billion portfolio of Berkshire Hathaway. Glenn Greenberg owns 14,074,705 shares as of 12/31/2007 , which accounts for 24.64% of the $3.32 billion portfolio of Chieftain Capital Management Inc.

Director Richard T. Burke sold 50,000 shares of UNH stock on 12/12/2007 at the average price of $57.71; the price of the stock has decreased by 33.67% since.

AstraZeneca PLC (AZN) Reached the 52-Week Low of $37.55

The prices of AstraZeneca PLC (AZN) shares have declined to close the 52-week low of $36.15, which is 39.4% off the 52-week high of $59.47. AstraZeneca PLC manufactures and markets prescription pharmaceuticals worldwide. AstraZeneca PLC has a market cap of $52.67 billion; its shares were traded at around $36.15 with a P/E ratio of 9.69 and P/S ratio of 1.85. The dividend yield of AstraZeneca PLC stocks is 5.2%.

AstraZeneca has been accused of violating the U.N.'s oil-for-food program, established in around 1990 by Britain 's Serious Fraud Office to relieve the impact on Iraqis of after Saddam Hussein’s 1990 invasion of Kuwait .

AstraZeneca PLC is owned by 4 Gurus. Among them, 2 reduced their positions, 1 initiated his position, and 1 increased his holdings.

HOTCHKIS & WILEY bought 6,527,300 shares in the quarter that ended on 12/31/2007 . Edward Owens owns 14,781,500 shares as of 12/31/2007 , which accounts for 2.62% of the $24224.48 billion portfolio of Vanguard Health Care Fund. Charles Brandes owns 13,009,633 shares as of 12/31/2007 , which accounts for 1.16% of the $47.85 billion portfolio of Brandes Investment.

Amgen Inc. (AMGN) Reached the 52-Week Low of $44.46

The prices of Amgen Inc. (AMGN) shares have declined to close the 52-week low of $44.46, which is 37.7% off the 52-week high of $70.49. Amgen Inc. is owned by 13 Gurus we are tracking. Among them, 1 initiated positions in the company, 5 increased their positions, 2 left them unchanged, and 5 reduced their positions.

Amgen, Inc. engages in the discovery, development, manufacture, and marketing of human therapeutics based on advances in cellular and molecular biology. It has a market cap of $48.36 billion; its shares were traded at around $44.46 with a P/E ratio of 15.77 and P/S ratio of 3.47.

Amgen has price competition from generic drugs, which will hurt the performance of the company. It is slow on blockbuster medicines, and it is also under pressure from competitors.

Dodge & Cox bought 11,972,170 shares in the quarter that ended on 12/31/2007 . Bill Miller owns 5,170,000 shares as of 12/31/2007 , an increase of 209.58% from the previous quarter. Edward Owens owns 9,989,355 shares as of 12/31/2007 , which accounts for 1.92% of the $24.22 billion portfolio of Vanguard Health Care Fund. Richard Pzena owns 9,982,236 shares as of 12/31/2007 , which accounts for 2.2% of the $21.08 billion portfolio of Pzena Investment Management LLC.

Exe VP, Global Commercial Ops George J. Morrow bought 2,025 shares of AMGN stock on 12/07/2007 at the average price of $69.97; the price of the stock has decreased by 36.46% since.