Teva
On the flip side of an aggressive, research-driven stock like Biogen Idec is generic giant Teva Pharmaceuticals (TEVA).
With over $20 billion in sales annually in all corners of the globe, Teva is the world’s largest manufacturer of generic medications. That means unlike some of the other pharma stocks out there, patent expiration is not an issue … if anything, patent expirations are good because it provides a bigger universe of generic drugs it can sell.
The margins, obviously, are less attractive in generics. But if you’re a low-risk investor it’s more important to find long-term stability for your portfolio than a drugmaker with high-margin medications it is about to see go off-patent.
Teva’s plan, then, is simply to make up for margins in scale and acquisitions. In its recent earnings call, the new CEO said he is “aware of the opportunities around us, including potential larger transactions.” Soon after that, rumors started swirling that Teva will buyout Indian drugmaker Cipla Ltd. for $6 billion.
Not only will deals like Cipla (if it happens) tighten Teva’s grip on generics, it will also provide big growth in an emerging market where healthcare consumption is rising rapidly — even more so than in an aging U.S.
With a 2.2% dividend yield, a dominant share of the global generics market and a will to stay bigger than everyone else for a long time to come … well, the only question you need to ask yourself is whether people will be taking their pills in the future. If the answer is “yes,” then you should see Teva as a rock-solid buy.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.
