PHARMACEUTICALS: THE NEXT NUMBER ONE GROWTH SECTOR?
If like me almost all of your friends have either taken sporadically or regularly cognitive supplements termed nootropics, then you are probably wondering where these drugs come from and what the societal and economic ramifications of these drugs are. These drugs are controversial across the board considering the significant increase of usage primarily amongst high school aged students. Leaving the societal and physiological part of the argument aside, an inescapable truth is that there is an increase of usage for these products and that means someone somewhere is having an increase in profits. Perhaps pharmaceuticals aren't the next .com bubble, but taking a look at some of the biggest firms might be useful for a budding portfolio manager. This article will look at the three biggest pharma companies, and next weeks article will look at some of the most promising start up pharma companies. The three biggest companies in the world according to Forbes are: Pfizer, Novartis, Sanofi respectively.
Pfizer is the largest pharmaceutical company in the world and has posted fairly steady gains over the last three years (Forbes, Bloomberg, Morningstar). According to Peter Lynch in his book “One Up On Wall Street,” this company would be an example of a stalwart (Peter Lynch 'One up on Wall Street'). That means that this company will not give you huge returns, but will provide consistent returns with relatively low volatility. Pfizer is perhaps the most well known of pharmaceutical stock options, but it might not necessarily be the best of options. Novartis has had similar amounts of revenue, but has had less goodwill and long-term debt (Morningstar). Knowing what to look for in a company is sometimes tricky, and I won't pretend to be the best portfolio manager in the world, but there are a few things in Pfizers' financials