Will Big Pharma Save Us All?

April 21, 2020    Portfolio Idea Pharmaceuticals Large Cap

This month, I’m continuing my search for stock that may benefit the current situation and will also do good in the long run, regardless of what happens.


What’s not to like about pharmaceutical companies in a world where more people are sick than ever, and we’re counting on drugs to give us back our freedom.

Although pharmaceuticals may sound like a sure bet, keep in mind:

  • Researching a new drug takes ages.
  • Researching a new drug takes tons of money.
  • Researching a new drug is incredibly risky as there’s no guarantee it will work.
  • Patents on drugs don’t last. So companies need to be continuously looking for new drugs.

That said, there is one big certainty. People are counting on drugs to help them. Especially as more and more people get older and older, you can be sure of one thing, people will keep buying drugs. Not just during the Corona crisis.

A good way to mitigate the risk and enjoy the benefits is to diversify. And that’s exactly what we do around here.

Large Cap

I’ve previously written about biotech companies. For that portfolio, I was looking for big risk in return for potential big rewards.

This time, I’m taking the opposite approach. I want big companies with lots of money (and thus also proven track records).

I’m talking about large cap.

And as last month, I’m also taking into account the debt ratio and the cash on hand combined with short term investments.

This Month’s Portfolio

These are the rules for the portfolio:

  • Europe and USA pharma companies.
  • Debt-to-equity ratio below 100%.
  • Enterprise value over $10 billion.
  • As much cash and short term investments as possible.
Symbol Name Current Price Cash & Short Term Investments Enterprise Value Debt ratio
GILD Gilead Sciences Inc 81.26 USD 24.35B USD 109.85B USD 63.25%
JNJ Johnson & Johnson 151.67 USD 19.29B USD 418.44B USD 62.30%
BMY Bristol-Myers Squibb Co 61.68 USD 15.39B USD 133.83B USD 60.22%
ROG.SW Roche Holding AG 330.80 CHF 12.27B USD 296.01B USD 60.59%
NOVN.SW Novartis AG 86.69 CHF 11.45B USD 225.81B USD 53.07%
SANF.MI Sanofi 87.73 EUR 10.86B USD 132.26B USD 47.57%
MRK Merck & Co Inc 83.10 USD 10.45B USD 233.10B USD 69.19%
PFE Pfizer Inc 36.08 USD 9.83B USD 260.09B USD 62.12%
AMGN Amgen Inc 236.60 USD 8.91B USD 164.58B USD 83.80%
AZN AstraZeneca PLC 50.44 USD 6.18B USD 145.49B USD 76.22%

A lot of big names in there, so that should at least give us some stability. And according to Uncle Stock’s backtesting, we can expect a 10% yearly return.

My philosophy: If you want to invest and your goal is to try to beat the market, you need a system. You need a system that can decide for you what to buy, when to sell and not to panic when things go down. Everything starts with selecting stock. You should not just select random stock here and there based on whims or things you read. No, create a system that suites your style and follow it. These posts give you example of what such a stock selection could look like.

Disclaimer: Don't believe anything I say or write. Always do your own research before making any investment decisions.