How Drugs, Eye Care, Protein Drinks, and Dog Food Beat the Stock Market
Any stock market portfolio that’s being used to save for retirement or otherwise, should have some exposure to the pharmaceutical industry.
But instead of pure play corporations like a discovery biotechnology firm, there are great businesses out there that offer a combination of pharmaceutical development and consumer products.
This extra diversification provides a lot of safety and a growth opportunity, as well.
On the stock market, one of a number of blue chip corporations that are great brands and offer this combination of pharmaceutical and consumer product exposure is Johnson & Johnson (NYSE/JNJ).
Johnson & Johnson is up 20% since the beginning of the year, which is pretty spectacular. Institutional investors are buying safety, and this is what Johnson & Johnson offers.
There are actually only a handful of corporations that are large-cap, blue-chip pharmaceutical and consumer products businesses.
Another of these corporations is Abbott Laboratories (NYSE/ABT). The company just beat the Street with its latest numbers.
On the stock market, Abbott Laboratories is trading at its record high and looks to be in a fairly solid uptrend. Of course, it’s very difficult to make a case for buying any stocks in this kind of market. The company’s stock chart is below:
Stock chart courtesy of www.StockCharts.com
Abbott Laboratories reported global sales of $5.4 billion, representing an increase of 3.5% on an operational basis. The company’s nutritional products division experienced a nine-percent gain in sales, while diagnostics grew 6.4%.
Earnings from continuing operations in the first quarter of 2013 were $544 million, or $0.34 per share, compared with earnings from continuing operations of $351 million, or $0.22 per share, in the first quarter of 2012.
Like the broader stock market, a number of big pharmaceutical corporations have been appreciating in price. My view is that a number of them are fully valued.
But for stock market investors, I think it is worthwhile to consider pharmaceutical corporations that offer a combination of businesses: pharmaceuticals, biotechnology discovery, foodstuffs, nutritional products, veterinary products, and other consumer items. These are complementary businesses, and they offer a lot of stability for an individual stock market investor.
Corporations are now reporting their first-quarter earnings numbers, and my read is that a lot of the numbers are coming in light. The fourth quarter of 2012 was very slow in terms of gross domestic product (GDP), and I think it’s probable the first quarter of 2013 will continue this trend.
The stock market has potential to appreciate further this year, but of course, I wouldn’t be buying it now. Corporations are going to have to deliver more earnings growth in order for this to happen.
With a major correction, however, the right companies will be worth buying. There is little in the way of uniformity from corporations at this time, but the good businesses are expecting solid business conditions in the bottom half of this year.