Many pharmaceutical stocks are benefiting from their peers working to develop and manufacture a novel coronavirus vaccine. This glow is powerful. But there’s something else that is driving them that will continue — even after a vaccine is found.
These stocks typically operate outside the typical business cycle. Smaller firms working on new drugs get their funding from various investors who see promise, as well as through partnerships with deep-pocketed pharma companies.
And all the drug companies have a steady source of demand. Many are like utility companies — just like people need electricity, they need their medications.
Certainly, in difficult times, some people will go without. But that is always the last straw, not the first. And many of the big pharma companies are helping with copayments at this point. Also, this is a prime time for generics. Insurance companies will be sharpening their pencils when it comes to name-brand drugs they cover if there are generics that are cheaper for patients.
These seven pharmaceutical stocks below are not reliant on coronavirus tailwinds. But they are quality companies of varying sizes that will continue to do well whether we get a Covid-19 vaccine or not. And big-picture staying power is a crucial ingredient in any Growth Investor recommendation I’d put on the table.
Here are seven pharmaceutical stocks I’m recommending now:
- Grifols (NASDAQ:GRFS)
- Repligen (NASDAQ:RGEN)
- Dr. Reddy’s Laboratories (NYSE:RDY)
- Takeda Pharmaceutical (NYSE:TAK)
- Zoetis (NYSE:ZTS)
- Merck (NYSE:MRK)
- Johnson & Johnson (NYSE:JNJ)
Pharmaceutical Stocks: Grifols (GRFS)
This biotech may not be a household name in the Untied States, but it is well known in Europe. This Spain-based company has been around for 111 years and is a leader in plasma research and plasma-derived medicines.
Plasma is the liquid part of the blood that carries cells, hormones and proteins through the body. It makes up about 55% of your blood. It is very valuable for a number of conditions because it contains antibodies, clotting agents and proteins.
During the pandemic, you may have heard people referring to convalescent plasma, which is the plasma of patients who have recovered from a disease. Grifols was a leading provider of convalescent plasma for the Ebola outbreak in Liberia. And it is a player in the Covid-19 fight as well.
As more biotech firms look for drugs to work with our immune systems to fight diseases, plasma research and development will continue to grow in demand.
But GRFS is still under the radar in the U.S. The stock is up 5% in the past 12 months, and it’s off 15% year to date. It also has a 1.5% dividend.
Repligen (RGEN)
The next name on my list of pharmaceutical stocks to buy is Repligen. This company has been around since 1981 and is focused on providing biotechs with the equipment and technology for necessary research to discover new drugs and therapies.
As gene therapy research has matured to actually include real gene therapy treatments, RGEN’s potential target audience has grown enormously. And that will continue as this trend expands.
RGEN has been around a long time, so it is a known entity to established firms and represents the kind of quality company that newer biotechs want to partner with.
Its services are certainly in great demand currently, but that demand will continue after the pandemic comes under control.
The stock is up 55% in the past 12 months and 28% year to date. It’s pretty expensive here, but its growth track takes some of the sting out of its valuation. Repligen is a strong buy in the Portfolio Grader system I use to make my Growth Investor picks.
Dr. Reddy’s Laboratories (RDY)
This India-based drug maker doesn’t get a lot of play in the U.S., but it is a leading generic drug maker with a market capitalization just over $9 billion.
It was started in India with the aim of making drugs available to all people at an affordable price. In doing so, it built itself into a key role in the massive generic drug revolution.
Dr. Reddy’s Laboratories is now a global drug company that supplies both over-the-counter and prescription medicines, and has added a division to create proprietary drugs focused on cancer and inflammation.
RDY also partners with drug companies that meet its goals, in helping develop quality, accessible medicines.
The stock is up 45% in the past year, and 34% year to date. Yet it’s still well valued. It currently offers a 0.5% dividend.
Takeda Pharmaceutical (TAK)
Not a big name here with most investors, it’s the largest pharma in Asia and one of the top 10 in world by revenue. The Asia market alone represents almost 60% of the world’s population.
It has been around since 1781 (no, that’s not a typo) and was incorporated in 1925, making it one of the oldest pharmaceutical stocks on the planet as well.
Yet with a market cap of nearly $58 billion, it is just a fraction of the size of the more familiar U.S. and European big pharmaceutical companies.
But the region where we will see the most growth is in Asia. I’m finding some great growth opportunities in China for my portfolios like Growth Investor that investors here often tend to overlook. And as relations with China chill once again for Western companies, TAK has an opportunity to be a major force in helping China grow its native pharmaceutical business and also supply medicines into growing Asian markets.
In 2018, Takeda bought Shire for $62 billion. And in the past year it has divested about $1 billion of regional drug portfolios to other firms.
TAK is up 10% in the past 12 months and off about 5% year to date. But it does deliver a 4.5% dividend.
Zoetis (ZTS)
The next company on my list of pharmaceutical stocks is Zoetis. It is a U.S.-based company that is in the animal health business, including vaccines.
It came to prominence last year as the African swine fever (ASF) ravaged the pig population across Africa and then spread to China. Pork is the most popular animal protein in China and farmers there had to cull more than 55% of their herds.
The prices of pork skyrocketed and China had to start importing the meat to keep a limited supply online. Add to the fact that the U.S., with effectively no cases of ASF, was in a trade war with China.
ZTS was already working on an ASF vaccine and is preparing to develop it. But the larger point is, animal health can have a significant economic effect on even the largest countries. Zoetis is a leader in this critical sector, and animal health alone is critical to focus on.
ZTS stock is up 28% in the past year and 6% year to date. It has a 0.6% dividend since most of its money goes back into research and development.
Merck (MRK)
There’s an interesting history behind one of the world’s largest pharmaceutical companies.
Merck was founded in 1668 in Germany by the Merck family. In 1887, the company sent an employee to the U.S. In 1891, he founded the US subsidiary.
During World War I, the company was expropriated by the U.S. government. After the war, the U.S.-based Merck was officially launched. It is now one of the 10 largest pharmaceutical companies in world by revenue and market cap.
Recently, its work in developing immuno-oncology drugs (drugs that work with the body’s immune system to fight cancer) is garnering headlines. And it also has an animal health division, which is a growing field, both for human health and animal health.
This is no moonshot company but it’s a solid, long-term investment in a growing sector. And it still is a leading player.
MRK is treading water over the past year, and off 9% year to date. But it does have a healthy and reliable 3% dividend, and it’s a good value here. Growth and income is a magic combination that’s getting more rare these days — but is at the heart of some of my favorite Growth Investor plays.
Johnson & Johnson (JNJ)
Founded in 1886, Johnson & Johnson now has over 250 subsidiaries in more than 60 countries. It has a significant consumer-facing business (through products like Band-Aid, Tylenol and Neutrogena). But it’s also a big player in healthcare, particularly through medical devices and pharmaceuticals.
Recently, most of the news on JNJ has been its huge lawsuit troubles with its talc-based baby powder. The company has now announced it will stop making talc-based powder and allow its controversial products to fade away.
JNJ has a massive $390 billion market cap because of its huge presence across the healthcare space. And getting this legal issue off its plate will be a big help.
Given its powerful brands and its reputation for quality, JNJ will remain at the center of the growing demand for healthcare products.
The stock hasn’t participated in the great growth boom like other pharmaceutical stocks, but this company is in it for the long haul. JNJ is up 7% in the past year, and 1% year to date. It also provides a rock-solid 2.7% dividend.
Currently, my Portfolio Grader that I use to find Growth Investor stocks, is picking up plenty of buys in all kinds of sectors. One that I’m particularly excited about now is helping enable a major upgrade across the global telecom industry.
The 5G Buildout Is an Incredible Opportunity for Investors Right Now
Within two years, most cell phones will be 5G enabled and be able to wirelessly handle television streaming. With 5G, we’ll have cable modem speeds on any device; no need to plug in. That’s a big deal for rural areas … the very same areas that are also key to President Donald Trump’s reelection. So, by pushing 5G over the goal line, Trump will deliver a big win for his base — and strike a blow against Chinese rivals like Huawei Technologies.
But big picture, 5G is about much more than trade wars and faster downloads. Because 5G is 100 times faster than 4G, it’ll allow your wireless internet devices to work in real time. That advancement is a game changer for tech companies.
With the 5G infrastructure market set to grow at an annual rate of 67% over the next 10 years, the entire market will go from $780 million to nearly $48 billion. This buildout is where I see opportunity with 5G stocks now.
Cable companies can do their best to fight back with fiber optics … but they can’t compete with the convenience of a smartphone, once it’s got ultra-fast 5G. That’s how my 5G infrastructure play will capture more market share from the broadband cable companies.
The stock I’m targeting is enjoying an influx of big money on Wall Street, and it has good fundamentals, too — making it a “Strong Buy” in my Portfolio Grader system now.
When you do, you’ll see how to claim a free copy of my investment report, The King of 5G “Turbo Button” Technology, which has full details on this company — and what makes it such a great buy now.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
