Monday, December 18, 2006
A wise old doctor once told me that pharmaceuticals can harm and they can heal; they always have and they always will. He said that sometimes investors will focus on the healing side, and the drugs stocks will skyrocket; other times investors will focus on the harming side and they will go lower than you can imagine. Furthermore, there does not seem to be much in-between time, and the bad times can go on for a long time, just as can the good times. I have no idea when the current obsession with the harming side of the drug companies will end. I recently heard that 25 years ago the average person died of heart ailments in his or her late 60s. Today, at least in part because of incredible advances in medications related to the heart, the average person dies much later in life of cancer. Yet, new drugs to fight cancer are giving hope and longer years to millions of people. Today, Pfizer announced it was increasing its dividend 21%. Is this good news, or bad news? Is this a company with so many troubles that it is starting to pay people to stick with it? Or is this a company that is proud of its accomplishments in preserving and advancing health and is showing its belief in it own future and that of the pharmaceutical industry? Time will tell. For my money, I am a great fan of life, and most of the people I love have been granted longer life by medications from the drug companies. I know the harming side of the industry will always be with us, but as another wise person I know once said, "A person starts dying the day he is born." With today's announcement, Pfizer is now yielding over 4.5%. It's starting to look like a bond. Hmmm, I can receive bond-like income that is 85% free of federal income tax. In addition, our Dividend Valuation Model is signaling that PFE is nearly 20% undervalued. Not bad, especially when you consider, that one day I may wake up and the drug stocks will be "miracle healers" again. A wise man, or woman would not bet against that happening. This blog is for information purposes only. Do not make buy and sell decisions based on any information contained here. Please consult your own financial advisor.
Labels: Company Discussion