A low price does not necessarily mean low quality. This applies to many products and services. And that also applies to shares.
We asked Three Motley Fool contributors to name no-brainer healthcare stocks they can buy right now for under $100. This is why they chose AstraZeneca (NASDAQ: AZN), Bristol Myers Squibb (NYSE: BMY)And Pfizer (NYSE:PFE).
AstraZeneca is a growth beast with a lot of potential
David Jagielski (AstraZeneca): AstraZeneca shares are trading around $80, but they aren’t likely to stay that low for long. The healthcare company is pursuing an aggressive growth strategy that should pave the way for good results and a much higher valuation in the future.
The pharmaceutical giant has achieved impressive results through acquisitions and in-house development. In just three years, sales grew by more than 70% to $45.8 billion in 2023. And AstraZeneca has some ambitious growth goals ahead. Management believes it can generate $80 billion in annual revenue by 2030. It expects to grow in all areas of its business (including oncology, cardiovascular, respiratory and immunology) and aims to have developed 20 new medicines by then. Today, the company has more than 180 ongoing projects in its robust pipeline.
Given the stock’s modest valuation, AstraZeneca is an easy growth investment that could justify adding to your portfolio. It’s currently trading at 19 times estimated forward earnings, which is lower than the healthcare average of 20. And it has a price-to-earnings-growth (PEG) ratio of 1, implying there’s good value to be found here over the long term . investors. And because AstraZeneca also pays a dividend that yields 1.8% at the current share price, there’s added incentive to be patient with the stock.
Trust the process
Prosper Junior Bakiny (Bristol Myers Squibb): Should pharmaceutical investors live in fear of patent cliffs? It’s understandable that some would do that. When a drug manufacturer loses patent protection on a key product, it can have devastating consequences for the bottom line. But such events are not death sentences – at least not if the company in question has the innovative capacity to develop newer drugs that will make up for the sales lost to generic and biosimilar competition.
In that vein, consider Bristol Myers Squibb, a pharmaceutical giant that just over two years ago lost patent exclusivity for the cancer drug Revlimid, its former best-selling drug. Bristol Myers’ revenue growth since then has been sluggish at best.
More bad news to come. Opdivo, a cancer drug that is currently among the company’s best-selling products, and the anticoagulant Eliquis, another high-performing drug, will both lose their key patent protection by the end of the decade. Expectations surrounding these issues have weighed on the drugmaker’s stock performance in recent years. The shares are currently changing hands at just under $41.
Long-term investors — and those looking for income, for that matter — should see Bristol Myers’ recent travails as an opportunity. The newer assets in the portfolio are becoming increasingly important. These include Reblozyl, a treatment for anemia in patients with beta-thalassemia that was first approved in the US in 2019, the cancer treatment Opdualag, first approved in 2022, and several others. Bristol Myers estimates it will generate more than $10 billion in revenue from this suite of newer drugs by 2026.
For reference, this portfolio generated $3.6 billion in revenue last year, up 77% year over year. By 2030, the pharmaceutical giant expects $25 billion in revenue from these products. In the meantime, Bristol Myers’ deep pipeline should yield other new breakthroughs.
While it may be going through a difficult transition period, it is not uncommon for pharmaceutical giants to experience such difficulties. And Bristol Myers is doing exactly what it needs to do to ultimately get out of these troubles, and the stock should reward investors with a long-term mindset. Indeed, this stock seems like a no-brainer for anyone who can look beyond the company’s current problems and trust the process.
Cheap in two respects
Keith Speights (Pfizer): Sometimes stocks have cheap share prices, but their valuations are not that cheap. Pfizer is cheap on both counts. The share price is currently hovering around $28. More importantly, the stock’s valuation is attractive, with an earnings multiple of just 11.9.
Granted, there are some reasons for Pfizer’s low valuation. Sales of the company’s COVID-19 products are plummeting. Like Bristol Myers Squibb, Pfizer faces a looming patent cliff. Key US patents for eight of its products – including some of its biggest moneymakers – are set to expire by the end of this decade.
But is Pfizer a value trap? I do not think so.
The biopharmaceutical giant believes new products and indications will add approximately $20 billion to its annual sales by 2030. These new products include the respiratory syncytial virus (RSV) vaccine Abrysvo and the multiple myeloma drug Elrexflo. Even if that goal proves overly optimistic, much of the negative impact of the patent gap could be offset by these new products and indications.
Pfizer built up a huge stockpile of cash as sales of COVID-19 vaccines boomed, and has put that money to work. The company acquired Arena, Biohaven and Reviral in 2022 and bought Seagen last year. Management expects about $25 billion in additional annual revenue from its business development deals by 2030.
These acquisitions have not hindered Pfizer’s dividend payments. The drugmaker paid $2.4 billion in dividends to shareholders in the first quarter of 2024 and plans to maintain and grow the dividend. That’s great news, especially considering Pfizer’s forward yield is already above 6% at the current share price.
What do you get when you combine a low share price, an attractive valuation, better growth prospects than meets the eye, and a juicy dividend yield? My answer is a stock that is a no-brainer buy.
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David Jagielski has no position in any of the stocks mentioned. Keith Speights has positions in Bristol Myers Squibb and Pfizer. Prosper Junior Bakiny has no position in any of the shares mentioned. The Motley Fool holds positions in and recommends Bristol Myers Squibb and Pfizer. The Motley Fool recommends AstraZeneca Plc. The Motley Fool has a disclosure policy.
3 No-Brainer Stocks You Can Buy Right Now for Under $100 was originally published by The Motley Fool
