Is There Money to be Made in These Medical Drug Stocks?
Ali is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In this unstable economic climate, finding ways to outperform the market is much easier said than done. However, one screening tool that has proven to be effective in determining whether a stock is moving higher is insider buying due to one simple reason: they buy stocks, just like us, to make more money. In addition, they arguably have the best view of the company being a part of the day-to-day operations and/or have a large investment of their own which they like to see increase in value. Below are a couple stocks with strong insider buying.
Forest Laboratories (NYSE: FRX) sells a variety of pharmaceutical drugs ranging in such treatments from Alzheimer’s disease to pneumonia. The stock has been volatile recently as major shareholder and billionaire Carl Icahn continues to push management to unlock shareholder value as the best way he sees fit. The stock currently sits right near its $36.44 52-week high, but Carl Icahn sees more upside ahead. From August 22-24, Mr. Icahn bought collectively an impressive 1,343,837 shares at a price of $34.57 equating to approximately $46.5 million worth of stock. This is an obvious sign of bullishness and is likely due to his team gaining two board seats at Forest Laboratories’ most recent annual meeting this past month. With the company having a pristine, debt-free balance sheet and approximately $9.50/share in net cash, I see the stock having some great value.
However, I more inclined to invest for dividends being a more conservative, long term investor and would look possibly more at a fellow competitor such as Pfizer (NYSE: PFE). Pfizer yields a very nice and consistent 3.7% dividend yield while generating huge amounts of free cash flow. Moreover, the company doesn’t have the uncertainty brought on by a shareholder activist. I think FRX is worth putting on the radar for a more aggressive investor, while PFE is more geared for the long term, conservative investor.
Opko Health (NYSE: OPK) is a pharmaceutical and medical appliances company looking to help treat a variety of cancers, disease, and ailments with operations primarily in the United States, Chile, and Mexico. The stock has been trending lower the past few months but Chairman, CEO, and major shareholder Dr. Phillip Frost sees more upside ahead. On August 24, he bought a sizable 47,500 shares in the open market after buying 32,500 shares the day before. While the stock has become cheaper the past month and the insider purchases are encouraging, Opko is clearly for the aggressive investor as the company trades at some lofty valuations and pays no dividend. If looking to get into the pharmaceutical/medical field, I believe a well-paying, consistent dividend paying stock like Eli Lilly (NYSE: LLY) trading at reasonable valuations will serve the long-term investor better. Moreover, with its very healthy 4.4% dividend, investors can get a healthy payout while they wait for the stock to continue churning gobs of free cash flow in hopes of future dividend increases.
As always, respectful comments and questions are always welcome on the message board below and please know any viewpoints are simply just the opinion of the blogger. I always strongly recommend every investor to do follow-up research and due diligence for the sake of their financial health.
Prohomes has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. 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.If you have questions about this post or the Fool’s blog network, click here for information.