The stock of major drugmaker AbbVie (NYSE: ABBV) has been priced at a discount lately over worries that more than 60 percent of its total revenue comes from one drug, Humira, which now faces biosimilar competition in Europe. Direct biosimilar rivals will also enter the United States market by 2023.
However, sales of the company’s top two cancer drugs, Imbruvica and Venclexta, are picking up. Endometriosis drug Orilissa is off to a great start, and AbbVie thinks it will soon win another approved indication for the drug in treating uterine fibroids.
AbbVie anticipates approval by the Food and Drug Administration in April for risankizumab in treating psoriasis, with an expected approval for upadacitinib later in the year for treating rheumatoid arthritis. Both drugs should be blockbuster winners for AbbVie.
Wall Street analysts project that AbbVie will be able to increase earnings by close to 10 percent annually, on average, over the next five years. The company also offers a hefty dividend that recently yielded about 5.1 percent, and there’s plenty of cash flow available for increases in its payout.
With an appealingly low forward-looking price-to-earnings ratio, recently in the single digits, AbbVie seems likely to deliver solid total returns over the long run for patient investors.
Ask the Fool
Q: I’m a new investor. When is the best time to buy my first stock shares? – R.K., Naples, Florida
A: You can start any time – but only invest dollars you won’t need for, say, five or more years.
Trying to time the market is generally futile: Even if the market has been climbing for years, it may keep climbing for a while. Waiting on the sidelines for the perfect time to jump in, you can miss out on gains. Whenever the market experiences a sharp drop, as happens occasionally, that’s a particularly good time to jump in, as bargains will abound.
Read up on investing, and commit your hard-earned dollars only when you’re comfortable doing so. If jumping in seems too scary, consider buying shares over time.
A great formula for building long-term wealth is to buy into strong and growing companies that have sustainable competitive advantages and are trading at attractive prices. Follow their progress and aim to hold for years. Even simpler, just stick with low-fee, broad-market index funds, which are great for any level of investor. Learn more at Fool.com.
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Q: Can you explain “front-running”? – L.D., Goshen, Indiana
A: A kind of insider trading, front-running is when someone invests with the aim of profiting on some not-widely-known information.
For example, a mutual fund manager might buy a stock for a personal portfolio and then buy many shares of it for his fund, driving the price up and personally profiting from that. A broker, knowing that her firm will be releasing a positive report on a company, might buy shares of it for herself. Some, but not all, kinds of front-running are illegal.
My dumbest investment
I’ve made a bunch of dumb investment moves. A particularly bad one was buying the stock of a nanotechnology company many years ago. Those shares are now worthless. – S., online
The Fool responds: That company turned out to be a great cautionary tale. It gained a lot of attention in the early 2000s, in part because its name suggested it was engaged in nanotechnology, which involves working with super-small materials at the molecular or atomic level. But disruptive new technologies, such as 3D printing and cloud computing, can excite investors long before many players in them are profitable.
Investing in such technologies early can be risky, as you don’t know which companies will emerge as big winners and which will fade away. Back then, the company was posting consecutive years of losses – but seeing its stock rise on hopefulness anyway. It nearly quadrupled over a few days on news of a secured patent, for example – and then gave back more than it had gained.
Patents and potential aren’t necessarily good enough to ensure success, especially if a company is burning through a lot of cash, posting losses, racking up debt and/or not yet seeing widespread demand for its offerings.
The company ended up filing for bankruptcy protection in 2009, after its stock fell from a height of nearly $100 to just 4 cents. It had amassed more than $400 million in losses between 1998 and 2009.
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