Bristol-Myers Squibb: An "Editor's Portfolio" Pick

09/15/2020 5:00 am EST

Focus: HEALTHCARE

Charles Carlson

Editor, DRIP Investor

Waiting for a sustained rebound in value stocks feels like waiting for Godot, the title character in Beckett’s play that never shows up, asserts income expert Chuck Carlson, editor of DRIP Investor.

Indeed, value investing has been a big no-show for much of the last 10 years. Nonetheless, if you are an investor who wants to add value stocks to a portfolio, one strategy is to buy growth stocks selling at value prices. One such stock in the Editor’s Portfolio is Bristol-Myers Squibb (BMY).

The pharmaceutical giant should see ample growth in revenue and profits this year, driven by the company’s 2019 acquisition of Celgene. The firm is set to grow nicely in 2021 as well. The consensus earnings estimate for 2021 is $7.43 per share, up from the $6.26 expected for 2020.

Based on that 2021 estimate, the stock trades at a value-stock P-E ratio of 8. Providing a kicker to total return is the stock’s yield of nearly 3%. Of course, being an election year, drug stocks have become the focus of political rhetoric from both sides of the aisle.

Wall Street concerns about price controls and increased regulations provide headwinds for drug stocks. But those headwinds are a big reason Bristol-Myers Squibb trades at such an attractive valuation.

Admittedly, Bristol-Myers Squibb has not been the most dynamic stock, though the stock has perked up a bit in recent trading. A strong breakout above $66 per share would be especially bullish for these shares.

I would feel very comfortable buying the stock at current prices. Bristol-Myers Squibb offers a direct-purchase plan whereby any investor may buy the first share and every share directly from the company. Minimum initial investment is $250.

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