A Few Ideas For Your Market Correction Buy List
This past weekend I took my 13 and 9 year old daughters to Washington D.C. It was their first visit to our nation’s capital. And I couldn’t wait to show them all the sights.
We did it all.
We had a private tour of the Capitol. We visited all the monuments on the Mall. And we even took a tour of the White House.
As you can imagine, we all had an amazing experience.
If you’ve never been to Washington D.C., I urge you to visit this incredible city at least once during your lifetime. You won’t regret it.
The great history of the United States comes to life before your very eyes. You really appreciate all of the sacrifices made by so many to preserve democracy and freedom.
Which leads me to the point of this little story.
As we were walking on the Mall from monument to monument, I got to thinking about the market correction. I remembered the panic I felt in my chest as the Dow dropped 1,000 points in the blink of an eye.
Many of you probably felt the same way.
But as I’m thinking of that horrible moment, I’m looking straight at the World War II Memorial. Then I looked to my right and there’s the Vietnam Veterans Memorial. And to my left is the Korean War Veterans Memorial.
I immediately felt a sense of calm sweep over me.
Looking at these monuments put everything into perspective. I realized through each of these wars the market survived. And afterward it went significantly higher.
If the market can survive these kinds of events, it should have no problem recovering from the current issues of the day.
So, with the market headed lower, it’s time to put a list together. I call it my Market Correction Buy List. I want to be ready to scoop up great bargains as soon as they appear.
Given the market’s volatility, I want stocks that offer stability, growth, and income. I only see one sector offering all three qualities… Big Pharma.
Companies like Johnson & Johnson (JNJ), Pfizer (PFE), Merck (MRK), Eli Lilly (LLY), and Bristol-Myers Squibb (BMY).
These stocks offer great stability. They’re huge companies with tons of cash. And their stock prices haven’t doubled and tripled in the past year like retail stocks and other cyclicals.
In other words, they don’t have as far to fall.
They’ve been held back for several reasons.
The potential impact of healthcare reform legislation. The large number of top selling drugs going off patent. And the lack of new blockbuster drugs coming to market.
However, these concerns are now old news in my opinion.
Big Pharma has been working hard to create a new growth cycle. A number of mega-mergers and acquisitions have boosted product portfolios at these firms.
Pfizer bought Wyeth. Merck merged with Schering Plough. Bristol- Myers acquired Medarex. And Johnson and Johnson purchased Mentor.
What’s more, they’re constantly doing in-licensing deals with top biotech companies.
This is a great way to gain control over the next generation of blockbuster drugs. And they’re doing it without spending billions on research and development.
Best of all, Big Pharma has the cash and resources to expand rapidly into emerging markets. All of them are working round the clock to grab big chunks of huge untapped markets in China, Brazil, and India to name a few.
These emerging markets are the future of the industry.
While developed markets are growing at just 3% to 6% annually, emerging markets are growing 14% to 17% a year. And China is growing at a whopping 20% annual clip.
The growth boost from in-licensing and emerging markets should more than offset any negative impact from healthcare reform.
Of course, it will take time for these trends to develop.
But you’ll get paid while you wait. Each of these companies pays a very nice dividend. And their yields are growing rapidly as their stock prices fall.
Take a look at these great yields.
LLY… 5.8%
BMY… 5.4%
MRK… 4.7%
PFE… 4.6%
JNJ… 3.4%
And I’m not the only one who thinks Big Pharma offers great value right now.
Superstar hedge fund manager, David Tepper, just took big positions in drug stocks during the first quarter. Tepper, who owns the Pittsburgh Steelers, just bought $258 million worth of JNJ, MRK, and PFE for his Appaloosa Management LP.
Appaloosa was one of the best performing hedge funds in 2009 with gains of more than 117%.
Dig a little deeper into a few of the Big Pharma names. With the market dropping, now’s the time to get your buy list ready. You may find now’s the time to add one or more of these companies to your long-term portfolio.
Category: Stocks
