This premium, European based health care company is unrealistically cheap. It represents a rare opportunity to engage in a low risk/high return investment IMHO.
I've reviewed SNY in detail previously. It has one of the most attractive pipelines in the industry. It is currently trading at 1.3 book value (!) and a forward P/E multiple of 7 (!!). Dividend yield is 3.1%
The company is a significant holding of Warren Buffett and many other gurus with a value orientation.
The downside risk is the potential for increasing regulation from the incumbent US administration. I think that this concern is overblown. SNY has thrived in the European environment at any rate. The D:E ratio is slightly higher than comps; however, the extremely high operating cash flow (9 billion Euros/y) is allowing the company to aggressively pay down the 7 B euros of long term debt.
Morningstar gives the equity 5 stars and a fair market value of $50/share. It is currently trading at $33 and change, providing a 34% margin of safety.
I own some shares in my RRSP and will happily add to the position at $33/share or below.
Note that Mr. Buffett has advised that a basket of health care stocks should be held in a portfolio because product pipelines are difficult to predict. This is an exception to his usual concentrated asset allocation strategy.
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