Earnings, earnings, earnings. From members of the Magnificent 7: Microsoft (MSFT), Amazon (AMZN), Meta Platforms (META) and Apple (AAPL). in the consumer sector from consumer stocks Starbucks (SBUX), McDonald’s (MCD), Mastercard (MA).From drug companies Pfizer (PFE), Moderna (MRNA) and Merck (MRK). And from Big Oil Chevron (CVX), ExxonMobil (XOM), Shell (SHEL), and BP (BP). Here’s what I’d watch for.
Bookkeeping. I added AbbVie (ABBV) as Pick #10 for My New World for Dividend Investing Special Report (You can find it in the Special Report section of this site along with all the content on this market and its trends for Dividend Income investors. But I’m reposting it as a stand alone pick so no one misses it. AbbVie (ABBV) has been a long-time member of the Dividend Portfolio with a gain of 213% since my January 29, 2020 pick. The question right now is Should it be a top dividend pick going forward? After all, the appreciation in the stock has dropped the dividend yield to 3.67%. (Add in a modest yield from buybacks and the total yield goes to 4.18%.) The most pressing question has been What will replace the $20 billion in annual revenue from the company’s blockbuster arthritis drug Humira (adalimumab) now that it faces competition from biosimilar generics? Now we’ve got some numbers to answer that question and to me they add up to AbbVie remaining a top dividend pick.
First, it was Viking Therapeutics (VKTX) on the attack with trial results that shows its GLP-1 dibetes/weight loss drug out performing current leader of the pack drugs fro Novo Nordisk (NVO) and Eli Lilly (LLY). On the news Viking soared.
Then Novo Nordisk struct back with data of its own showing progress on an oral formulation of its rugs. (All existing GLP-1 drugs are delivered by injection.) That cratered Viking Shares. Now, March 26, Viking has released new Phase 1 trial data from a multiple ascending dose study of the oral version of VK2735, a dual agonist of the glucagon-like peptide 1 (GLP-1) and glucose-dependent insulinotropic polypeptide (GIP) receptors.
Bookkeeping. I added Pfizer as the first of 10 picks in my Special Report A New World for Dividends. You can find this write up on that long Special Reports post. But I want to make no one misses that pick and update.
Let’s say you’re a dividend income investor. You need cash income in retirement. Or you want your portfolio to generate cash now so you can invest in new opportunities. Or you just want the extra safety and lower risk that owning a stock with a substantial dividend can bring. Whatever your reasons–and I can think of a lot more–this is a particularly challenging financial market for dividend income investors.But I do think there are strategies dividend income investors can successfully pursue even in this challenging market. In the rest of this Special Report I’m going to explain the three ways I think you should be thinking about dividend income investing in this market. And then I’m going to give you 10 dividend stocks that I think are especially well-suited to producing income (and price appreciation, which is always nice even if you’re an income investor) in this market environment. First pick just posted–Pfizer
Today’s stock pick of the week is Merck, (MRK). Merck’s “problem” is that one of its biggest revenue streams comes from Keytruda, an oncology drug that will be going off-patent in 2028. In 2023, Merck projected new oncology drugs would bring in an additional $10 billion to replace Keytruda’s revenue. At this year’s JPMorgan healthcare conference, the company’s projection was even higher at $20 billion by the 2030s.
Today’s Quick Pick is Eli Lilly And Co (LLY). Lilly is my favorite big drug stock right now. The company recently announced second-quarter earnings and showed 22% year-over-year sales growth. The company has a promising pipeline of new drugs. Mounjaro, Lilly’s diabetes drug, is likely to get weight-loss approval from the FDA. They also have new products for Alzheimers, and Cardio Metabolic drugs coming out soon. The growing enthusiasm for diabetes and weight-loss drugs has the stock overvalued by about 46% according to Morningstar. Their competitors are in similar situations. Novo Nordisk (NVO) is 28% overvalued according to Morningstar. At this point, if you’re looking for somewhere to immediately put some money to work, I’d still go with Eli Lilly. In this case, you have to consider not just the absolute valuation but also weigh the prospects of both companies. In my opinion, Eli Lilly outshines Novo Nordisk if you look at the pipelines at the two companies
After a big week of tech earnings news, stocks and investors will move onto fourth quarter 2022 earnings for consumer stocks, health care, and a little taste of fintech.
Shares of Eli Lilly (LLY), a pick for my Jubak Pick’s Portfolio in a post yesterday, are up 8.89% today as of noon New York time, September 28, on news that an experimental Alzheimer’s drug from Biogen (BIIB) and Japan’s Eisai(ESALY) slowed cognitive and functional decline by 27 percent in a clinical trial. Today shares of Biogen are up 38.07% and shares of Eisai are up 62.6% on the news. Why the pop in Lilly? As I explained in my post yesterday, Lilly has its own Alzheimer’s drug in development and positive results out of Biogen/Eisai are thought to be a positive for that drug too.
I’m extremely reluctant to add any stocks to any portfolios right now. There’s just too much near-term uncertainty and we remain locked in the grip of a pushing Bear Market. But I do want to upgrade my portfolios when possible to increase their future upside. So tomorrow September 28, I’ll be adding shares of drug maker Eli Lilly (LLY) to my Jubak Picks Portfolio; To make this an upgrade rather than an addition to this portfolio, I will also be selling shares of biotech Incyte (INCY) out of that portfolio. In this paired trade I think I’m adding a comparatively stronger drug pipeline to my holdings.
This week’s Trend of the Week is “Drug Stocks Aren’t a Safe Haven Anymore.” Drug stocks seem to have lost their safe haven status. As of September 20, the Health Care Select Sector SPDR ETF (XLV) was down 4.6% in the last month, and Pfizer (PFE) was down 7.55%. Why? Investors who were looking for safe havens may have decided they don’t need them any longer if the volatility continues to not be as bad as expected on the downside. Or many analysts cut their estimates with the signing of the Inflation Reduction Act, which took steps toward drug price negotiations for Medicare and Medicaid. Or since drug stocks have been falling maybe they’re no longer a safe haven. (And yes, that’s circular logic.) Some of the ETF dips can be attributed to one stock: Moderna (down 12.46% in the last month) which is considered by much of the market as a one-trick pony–a Covid stock. However, I’m adding Moderna to the Jubak Picks Volatility Portfolio on September 27 because the company has a pipeline full of new vaccines based on the success of their Covid vaccines. Overall, drug stocks may not be the safe havens that they once were but there are still selective buys in the sector.
The federal government has agreed to purchase 105 million doses of Pfizer-BioNTech’s rebooted vaccine for $3.2 billion, the Washington Post reported on Friday. At $30.50 a dose, that’s a premium over the initial contracts the government made for the original vaccine in 2020, when the vaccines were $19.50 per dose. the government is expected to sign a new contract with Moderna (MRNA) shortly. Pfizer (PFE) is a member of my Dividend Portfolio. The shares are up 35.14% since I added them to the portfolio on August 28, 2020. The stock is down 11.89% year-to-date for 2022 as of the close on Friday, July 22. However, they are up 4.40% in the last month. Pfizer pays a 3.12% dividend.
