Pharma Stocks for Value Investors
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Value investment has a legion of fans and they have good reasons to follow the concept. Value investment focuses on building a long-term portfolio by picking up fundamentally strong companies. While value stocks may lack the thrill of investing in so-called glamour stocks, capable of providing astronomical returns in a short span, these stocks provide low volatility and healthy returns over a long time horizon.
Value stocks are generally defined as stocks with low Price to Earnings ratio, coupled with low Price to Book ratio and solid dividend history. However, investors need to find their own style for picking up value stocks for their portfolio, based on their investment objectives and investment horizon. To get you started with the stocks for your portfolio, here is a list of choice biotech stocks ready to be included in your investment cache:
AstraZeneca (NYSE: AZN): One of the most prominent pharma companies in the world, AstraZeneca develops and markets a wide variety of drugs and therapies for various ailments. It specializes in oncological, cardiovascular and gastrointestinal therapies. This British company has a relatively low Price to Earnings ratio of 9.69 and its Price to Book ratio is also highly attractive at 2.64. AstraZeneca also boasts of a solid capital base of $59.1 billion. So, while its Debt to Equity ratio is on the higher side at 40.13, the company should be able to weather the storm with its robust liquidity position.
On the downside, AstraZeneca’s product pipeline does not seem to be in top shape. This point becomes even more relevant as a number of AstraZeneca proprietary drugs are likely to go off-patent in the near future. The stock has not only shown good capital returns in the past, but also provides robust regular income in the form of dividends. AstraZeneca grew 1,300% since its debut in 1993, while offering dividend yield of more than 4%. The company recently entered into a new collaboration with Isis Pharmaceuticals for developing five antisense oncology drugs.
United Therapeutics (NASDAQ: UTHR): The company develops and markets drugs for various ailments including pulmonary arterial hypertension and metastatic brain cancer. United Therapeutics reported 20% revenue growth for its quarter ended on Sept. 30. The stock trades at beta of 0.95 while its Price to Earnings ratio is 10.81.
United Therapeutics debuted in 1999 and since then has grown 752%. The stock is currently trading about 15% down from its 52-week high of $59 and thus offers good entry point. However, you should keep in mind that the company’s tablet version of hypertension medication was recently rejected by the FDA. However, the drug has the FDA approval for intravenous and subcutaneous administration. The stock has also been recently downgraded by Goldman Sachs. United Therapeutics has market capitalization of $2.67 billion and the company’s latest EPS was reported at $4.86.
Medtronic (NYSE: MDT): This $42 billion company is engaged in the business of developing therapies for managing heart rhythm disorders. The stock has recently been rated Buy by Argus with the price target of $48. Citigroup, on the other hand, expects the stock to touch $50.
Medtronic is currently focused on diversifying its portfolio. It recently introduced Cervical Facelift for treating cervical spine related issues. Medtronic stock is trading at a Price to Earnings ratio of 12.78 and its latest EPS stood at $3.29. The company’s Price to Book ratio is 2.55, among the lowest in its peer group. The stock grew 11% this year and its dividend yield is 2.5%. The company reported its latest dividend at 26 cents per share.
Medtronic recently updated estimates for its annual revenue. The company expects its revenue to grow by 3% to 4% in fiscal year 2013. Its annual EPS is expected to grow by 5% to 7% and thus, it is likely to be announced between $3.62 and $3.70. Medtronic recently had to recall two types of drug infusion pumps. The company did not provide the figure for estimated loss suffered due to recall.
These three companies provide a unique mixture of strong stock price performance, robust financial metrics and healthy growth prospects. If you are planning to create a value stock oriented portfolio, you should look at these stocks for good long-term performance.
StockRiters.com has no positions in the stocks mentioned above. The Motley Fool owns shares of Medtronic and has the following options: short MAY 2013 $44.00 calls on Medtronic. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!