Markets always look forward. The panic and uncertainty surrounding the track of the virus is quickly passing. The next market phase is likely to be all about the economic impact of the shutdown and the recovery, notes Tom Hutchinson, editor of Cabot Dividend Investor.
Companies that can endure and thrive through the rest of the crisis and recovery will own the near and intermediate terms. And the relative performance should reflect that fact.
AbbVie Inc. (ABBV) — yielding 5.8% — is a cutting-edge, U.S.-based biopharmaceutical company specializing in drugs and treatments that incorporate biotechnology as a solution to human diseases.
Nothing has really changed just because the world around it is collapsing. People won’t stop taking their medicine. And healthcare will likely emerge as the hero of this crisis.
Everything this company had going for it (the pipeline, a big in-the-works merger, better-than-expected earnings, the safe and high dividend) is still intact, only the stock is a lot cheaper now.
Few companies have such a defensive business combined with extremely powerful demographic headwinds from the aging of the population. The company is facing competition for its number one selling blockbuster drug Humira overseas and will face competition in the U.S. starting in 2023.
The stock got creamed as investors worried about replacing Humira revenues. But the company has a powerful pipeline and newly launched drugs that I believe are more than capable of replacing lost revenues. As well, the merger with Allergan (AGN), which should close in the next couple months, will further diversify the company.
Investors, as well as insiders, had realized ABBV’s value, and the stock soared over 60% in the months before the virus. ABBV was a good stock before the crisis and will be after the crisis. It is also one of the few stocks you can buy here with the remaining uncertainty.
