Wednesday, January 25, 2006

Pharma Rotation

It definitely looks like it’s time to rotate back into the big pharmas. They have very attractive dividend yields and any tiny hint of good news; the stocks just take off. Bristol Myers (BMY) reported today and beat the estimates by a few pennies and the stock shot up 3% on very heavy volume. This is always a good sign! They reiterated a sluggish 2006, but the market has already priced that in and is looking for a 2007 turn around. So far we’ve had Pfizer (PFE), Bristol Myers and Abbott Labs (ABT) beating estimates. I like all of these companies, but I would be hesitant about putting any money in Johnson & Johnson (JNJ) here. Like a high stakes poker game, JNJ folded and Boston Scientific (BSX) ended up with Guidant (GDT). JNJ needs to show the Street that they have a strategy to boost their top line growth. Guidant was their answer, but not anymore... Everyone is assuming that they’ll go after St. Jude Medical (STJ) now, but we’ll have to wait and see. I have my doubts about that.

So what would I do? At this point, I would favor the pharmas over the biotechs. All the good news is pretty much factored into the biotechs, but there’s still a lot of pessimism in the big pharmas. I'm not selling any of my biotech holdings, but I would initiate positions in the pharmas. It's finally their time to shine a little bit!


Post a Comment

<< Home