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Spokane, Washington  Est. May 19, 1883

Motley Fool: A promising deal

Pfizer’s pipeline of drugs in development should contribute to growth in a major way.  (Stephanie Keith/Bloomberg)

Pfizer (NYSE: PFE) brought in more than $100 billion in revenue last year – a record. But the pharmaceutical giant is facing some headwinds; these include declining coronavirus vaccine demand and the looming expiration of patent protection for several of its top drugs.

Today, Pfizer’s biggest problem is slowing growth. But the company has invested in its pipeline. Pfizer has bought several companies over the past few years and predicts that its recent purchases of Arena Pharmaceuticals, Biohaven Pharmaceuticals and other companies should add $10.5 billion to revenue in 2030. Meanwhile, it plans to buy oncology specialist Seagen for $43 billion, which should drive additional billions of dollars in revenue.

Pfizer’s own pipeline of drugs in development should contribute to growth in a major way. Pfizer expects to launch 19 new products or indications over an 18-month period, expecting that 15 or so should bring in enough revenue to more than make up for patent protection losses.

Pfizer shares recently sported a forward-looking price-to-earnings (P/E) ratio under 12 – quite reasonable for a company promising so much growth, both from the internal pipeline and through acquisitions. Its share price was recently down 27% from its 52-week high, and that decline has pushed its dividend yield up to 4%. (The Motley Fool owns shares of and has recommended Pfizer and Seagen.)

Ask the Fool

Q. What’s “window dressing” in the mutual fund world? – P.W., Baton Rouge, Louisiana

A. The term refers to a company or entity doing something to make itself look better to investors, often at the end of a reporting period. For example, mutual funds disclose their holdings quarterly. If a fund’s managers want to impress, they might load up on shares of some popular stocks just before the quarter ends to give the impression that the fund has held them for most or all of the quarter.

Q. How do I figure my taxable gain when I sell shares of a stock that split 2-for-1? – G.T., Strasburg, Virginia

A. Let’s go through the math together. Imagine that you bought 100 shares of Home Surgery Kits (ticker: OUCHH) for $36 apiece, using a brokerage that charges $0 for trades. Your cost basis is $36 per share, or $3,600 for the lot. When the 2-for-1 split occurs, your 100 shares will become 200 shares (and the stock price will be reduced proportionately, leaving the value of your stake unchanged). Your cost basis will also be split 2-for-1, so it drops from $36 per share to $18 per share. (Multiply that by your 200 shares and you’ll arrive at the same original cost basis, $3,600.)

Now let’s say that sometime after the split, the stock is trading at $22 per share and you decide you want to sell. The total value of your stake is $4,400, so if you sell all your shares, your gain will be $800 – $4,400 minus the cost basis of $3,600. If you sell one share, your gain will be $4 – $22 less the basis of $18.

My smartest investment

My smartest investment move was setting up my paychecks to be direct deposited into my savings account. I’ve saved $10,000 this year by having that money routed away from my checking account, where it’s so easily spent. – M.K., online

The Fool responds: You’re onto something very smart there. It can be hard to find the willpower to avoid spending more than you should – but making your dollars a little less available can be quite effective.

There are many other ways to use automation to benefit your financial health. For example, you may be able to have a chunk of your paycheck automatically routed into a 401(k) account, where that money can be automatically plunked into investments you’ve chosen. (Here’s a tip: For long-term money, consider a low-fee, broad-market index fund, such as one that tracks the S&P 500.) If you can set your 401(k) account to automatically increase the portion of your paycheck that it gets by, say, 1% each year, that’s a great move, too.

You also might be able to have a portion of your paycheck automatically deposited into a retirement savings account. You could set routine bills – such as your mortgage, insurance and utilities – to autopay, too, to reduce the chance of their being paid late or forgotten.

The more of your financial life that you automate, the more financial goals you may be able to meet.