Pfizer's Fall

One thing is for sure, no one can ever say that investing in the stock market and guessing where the Global Economy is a boring adventure. Right now, we have an inverted yield curve, a slowing housing market, domestic auto sales are slumping and the U.S. dollar is starting too weaken. You think all is bad and the future is bleak?

Well U.S. corporate earnings are stong, the P/E ratio of the S&P 500 is reasonable, Mergers and Acquisitions are fueling stock price premiums, unemployment is low, companies have lots of cash and credit is still cheap.

So is the market a great buy? Or is it time to hoard one's portfolio in cash? Honestly who knows?? The point of this Blog is too encourage prudent investors to buy great companies and reasonable prices. That's not too say, I won't guess the general direction of the economy or where certain sectors are heading, but the most important factor is owning quality.

I recently purchased shares of PFIZER (PFE-NYSE,$24.80 U.S.), with all the bad press out there, Pfizer is one stock a lot of people have been staying away from. Well sometimes those are the best times to buy. As JP Morgan once said " Buy when there is blood on the streets." Pfizer was knocked down becasuse a drug they were working on was canceled during the development stage. That drug was expected to replace the revenues from their current blockbuster drug Lippitor.

Once news got out, the stock sank in 11% in one day. The major press jumped on the bandwagon, and the rest was negative history. Well the press ignored the fact that Pfizer has other drugs in the pipelne that are not blockbusters, but they will add to revenues, a triple AAA credit rating (highest rating a public company can get), and a solid dividend yield at 3.8%.

Is there a downside? Of course, the Pfizer could have more development disappointments, they might have to acquire other drug companies at premium prices to add those products to their pipeline, and earnings growth will definitly be slower in the short term, causing the share price to stay flat for a while.

Is Pfizer worth the risk right now? You bet it is. Most times, if you can pick up a solid Blue Chip stock because of near term disappointment, you will be rewarded in the long term. In the meantime, you get 3.8% on your money, a depressed stock price that probably won't head much lower and Pfizer might even be a takeover candidate because its low share price might be appealing to another firm.Pfizer didn't change its earnings estimates, and the company still has a solid balance sheet. You might have to own these shares for a few years before you see any serious upside in the share price, but the potential is worth it.

Next blog, I will write more on my thoughts on the economy, the stock market and construct a portfolio.

See ya next time