Pfizer (NYSE: PFE) is arguably one of the best health care stocks to own right now. Besides sporting a mountain of cash and a top-notch shareholder-rewards program, the company has developed one of the richer oncology pipelines in the business.
The drugmaker’s PD-L1 inhibitor avelumab – brand name Bavencio – that it co-develops with Merck KGaA tends to grab the headlines, but Pfizer also has an earlier-stage oncology pipeline that’s home to a slew of high-value experimental drugs and biologic therapies. Over the next decade, these under-the-radar drug candidates could very well transform Pfizer into a top dog in oncology.
Meanwhile, the company is looking to sell or spin off its consumer health care unit. By shedding this business, Pfizer should have yet another significant source of funds with which to boost merger-and-acquisition activity and shareholder rewards. The company’s dividend payout recently yielded 3.7 percent, with more room to grow.
Between 2017 and 2022, the company thinks it can win approval for as many as 15 new drugs or new indications for existing drugs with blockbuster potential.
With its robust clinical pipeline and exceptionally strong balance sheet, Pfizer is worth considering for a berth in your long-term portfolio.
Ask the Fool
Q: What’s a “defensive” stock? – R.C., Jacksonville, North Carolina
A: It’s stock in a company whose performance isn’t very tied to the economy’s movements. For example, people might put off buying refrigerators or cars during a recession, but they’ll still buy groceries, socks, soap, gas, medicine, electricity and diapers. Food, tobacco, energy and pharmaceuticals are some defensive industries, seen as more stable than their “cyclical” counterparts, such as the homebuilding, steel, automobile and airline industries. You don’t have to avoid cyclical industries, but know that they can move sharply in relationship to the economy.
Q: Can I match the performance of Warren Buffett’s company, Berkshire Hathaway, by buying the same stocks it owns? – M., Midland, Michigan
A: Not at all. Many people mistakenly think of Warren Buffett’s company as a kind of mutual fund, since it does own stock in a bunch of companies, such as Apple, American Express and Coca-Cola. We might buy or sell the same stocks that Buffett or his money managers do, but we can’t do so at the same time, as their moves are only revealed via occasional required filings with the Securities and Exchange Commission.
Also, Berkshire Hathaway is much more than a portfolio of stocks. It’s a conglomerate with strong focuses on insurance and energy, and it encompasses dozens of entire companies, such as Forest River, GEICO, See’s Candies, Fruit of the Loom, Benjamin Moore, Clayton Homes, Johns Manville, sneaker maker Brooks, boot maker Justin Brands, Dairy Queen, Pampered Chef and the BNSF railroad, among many others. You can’t duplicate those.
Instead, you might just buy shares of Berkshire Hathaway (NYSE: BRK-B) itself. (The Motley Fool owns shares of and has recommended Berkshire Hathaway.)
My dumbest investment
My dumbest investment was buying shares of a technology-oriented mutual fund in my Roth IRA. They immediately took a nosedive, sharply falling in value. What should I do? Cash it all out and claim a loss on my taxes? – L.W., Elk Grove, California
The Fool responds: That investment experience stings, but it might not be as bad as you think. Many stocks and industries can be quite volatile – and technology-oriented ones can be especially so. Many solid companies and mutual funds will head south for a while, and savvy investors should expect occasional downturns and be ready to be patient.
If you have faith in the mutual fund’s managers or in the companies in which it’s invested, you might want to hang on. If you don’t, then it’s best to cut your losses and move your money to investments in which you have more confidence.
That said, understand that IRA accounts work differently than regular brokerage accounts, and you don’t realize taxable gains and losses in them. You can still buy and sell various holdings in them – and then cash out parts or all of the IRA in retirement. At that time, funds withdrawn from a traditional IRA will be taxable income to you, while Roth IRA withdrawals will be tax-free. Taking money out of an IRA early can lead to penalties – and taxes.