For our latest recommendation, we revisit one of the world's most prominent technology companies, Mi...
A Cure to What Ails You
03/02/2009 12:00 pm EST
Louis Navellier, editor of Blue Chip Growth, says a big-name pharmaceutical stock is poised to profit from a weaker dollar and the government’s stimulus package.
Yes, the $787-billion spending/stimulus bill will help the US economy, but it is unlikely to significantly stem rising unemployment. On the contrary, the jobless rate could possibly hit 12% later this year.
The net result of this will surely be a weaker US dollar, brewing inflation, and believe it or not, a resurgence in business and consumer spending. And since our Blue Chip Growth Buy List is focused on the very best commodity-related companies and international stocks, we will surely see continued profits across the next several months as the US dollar decays and inflation perks up.
I know it's odd to think that reckless actions in Washington can benefit us, but in this instance it's true. The stimulus package will indeed help the economy—just not in the way President Obama and his Democratic counterparts had planned.
Where do we go from here? Well, the only thing that is certain is more partisan bickering, escalating deficits, and the eventual collapse of the US dollar. But in the interim, we should stay focused on the fundamentally superior companies that will benefit from the current conditions. By steering clear of the hardest hit industries and focusing on the opportunities, we will continue to beat the market in 2009.
Bristol-Myers Squibb (NYSE: BMY) is a strong health care pick with an international reach. The company offers a hefty $1.24 dividend (at a yield of 6.7%) and has seen excellent sales and earnings in these tough economic times. Consumers will cut back on just about anything else before they trim their health care expenses.
BMY has a blockbuster cardiovascular line-up that includes the popular heart disease drug Plavix, as well as Pravachol (which lowers cholesterol) and Avapro (for hypertension). The company also makes antipsychotic medication Abilify and drugs in a number of other therapeutic categories. Through its Mead Johnson subsidiary, Bristol-Myers makes Enfamil infant formula and other nutritional products for children.
In the fourth quarter, strong sales of Plavix helped BMY post better-than-expected operating earnings of 46 cents per share compared with a loss of five cents per share in the same quarter a year ago. The analyst community expected earnings of 41 cents per share, so the company posted a 12.2% earnings surprise.
In the US, Bristol-Myers posted a fourth-quarter sales increase of 13%, but due to a strong US dollar and unfavorable exchange rates, its foreign sales declined 9%. Clearly, if the US dollar weakens in the upcoming months, it will likely help boost Bristol-Myers' sales and earnings.
BMY does not face the same massive litigation other pharmaceutical stocks do and has been much more stable than its competitors that have been announcing massive layoffs. BMY is benefiting from strong institutional buying pressure right now and is a great buy. (It closed above $18 Friday—Editor.)
Related Articles on STOCKS
We hold three biotech stocks in our growth portfolio — Biogen (BIIB), Bioverativ (BIVV), and R...
Under the guise of clamping down on “widespread corruption,” Prince Mohammed bin Salman ...
Leading value investor and money manager John Buckingham sees upside potential in two banking stocks...