Market Pulse: Healthcare stocks doing well as predicted
In our March 20 article titled Bargain Hunting we began with a quote from John Templeton who said market bottoms occur “at the moment of maximum pessimism.”
That was one day before the market low and pessimism was extremely high.
We listed several attractive stocks, most of which were in the healthcare sector. Why healthcare? Stability. We were (and are) fighting the coronavirus.
Several of the stocks we mentioned are in today’s news. Let’s start with Pfizer (PFE), which is a co-leader (along with AstraZeneca and Moderna) in the search for a vaccine.
The feds placed an order for 100 million doses for $1.95 billion and can get an additional 500 million doses free. The additional doses depend on FDA approval and Pfizer’s ability to make that many. Pfizer says they can make 100 million this year and 1.2 billion in 2021. Most important, Pfizer expects to seek regulatory review in October.
A Phase Three trial began this week. Their expectation for regulatory review in two to three months tells me they’ve seen enough to know where this is going, so they’re manufacturing it now full tilt. The stocks of Pfizer and its German partner BioNTech responded well.
A second healthcare stock that I recommended was Becton Dickinson (BDX). BDX doesn’t get any press as a vaccine play, but it is. They have orders from the U.S. and Canada for 265 million injection devices, most to be delivered by year-end. They expect many of orders from overseas and recently the UK ordered 65 million.
They have the capability to produce all these and also syringes and needles for the seasonal flu. While the drug companies might not make much money with the vaccine, BDX will on the devices.
This reminds me of the gold rush. The miners made little or nothing while the suppliers did well. As Mark Twain said, “During the gold rush it’s a good time to be in the pick and shovel business.”
Another of our recommended stocks was Amgen (AMGN). Amgen has benefited from a very strong biotechnology sector. It can be considered an income play as they just declared a $1.60 per share dividend for the third quarter of 2020 (a 2.5% annual yield).
The news on the vaccine front from Pfizer and others is very encouraging. Pfizer’s chief business officer said, “I have great confidence that our industry can prevail in the ultimate outcome of our battle against COVID-19 — and that science will win.”
David Vomund is an Incline Village-based Independent Investment Advisor. Information is found at http://www.VomundInvestments.com or by calling 775-832-8555. Consult your financial advisor before purchasing any security.
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