reDespite the stories of newly created crypto millionaires, building wealth by investing usually takes time. One way to find businesses that will create wealth in the future is to look at those that have generated it in the past. It means asking which companies have adapted to all kinds of economic conditions and industry changes over the decades.
Pfizer (NYSE: PFE) and Johnson & Johnson (NYSE: JNJ) are two companies that reinforce their strong resumes with clear strategies for the future. Investors looking for the recipe to become a millionaire might find all the ingredients they need in two of the healthcare industry’s most well-known companies.
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The 153-year-old pharmaceutical giant has undergone a transformation in recent years. He had to. After returning nearly 4,000% between 1980 and 2000, the stock only climbed 20% over the next 20 years.
First, she created a joint venture of her consumer health business with GlaxoSmithKlineIt was in 2019. Then, he created Upjohn – his activity excluding patents and generics – with the assets of Mylan. Who formed Viatris (NASDAQ: VTRS). CEO Albert Bourla hoped the remains would be an organization with a special focus on scientific discovery.
It didn’t take long to see the signs of the vision come true. The company has expanded its partnership with BioNTech and helped create Comirnaty, the first vaccine using messenger RNA (MRNA) to ever be allowed. As of March, Pfizer and BioNTech shipped 430 million doses to 91 countries. Many believe the vaccine should last beyond the pandemic, just like a flu shot. Pfizer is ready and plans to produce up to three billion doses in 2022.
Bourla expects more breakthroughs like Comirnaty in the future. The company already has many blockbusters. Its bestsellers, Prevnar and Eliquis – drugs to prevent blood clots and pneumonia, respectively – as well as the treatment for breast cancer Ibrance, generated more than $ 16 billion in revenue last year. However, Bourla is focused on the future.
The company’s pipeline contains 99 new therapies or potential new applications for an existing drug. Management has also indicated that it expects acquisitions of drug candidates in either Phase 2 or Phase 3 clinical trials. The pipeline and deals are designed to generate revenue in the second half of the decade. This would give long-term visibility to a company that is expected to generate $ 72 billion in revenue this year. The company has also signaled its intention to become a leader in using mRNA technology to develop treatments. It even increased its projected research and development spending to reflect this decision.
Pfizer could be a profitable investment based on traditional businesses alone. The $ 46 million in non-COVID revenue expected this year and the 4% dividend yield would attract many buyers. Combining that with the mega-blockbuster COVID vaccine and a robust pipeline makes it even more appealing. The top line has increased by 8% in the last quarter without counting Comirnaty. If management moves can support this level of growth, an investment in Pfizer should beat the market over time.
2. Johnson & Johnson
Johnson & Johnson is one of the best-known brands in the healthcare industry. It’s also been on Fortune’s Most Admired Companies list for 19 consecutive years. The last eight were like the most admired pharmaceutical company. This ranking can be built on a historical past rather than recent performance. On the one hand, the title has consistently underperformed the largest S&P 500 index over the past decade. Like Pfizer, the period 40 to 20 years ago was exceptional.
|Period||Total return of the S&P 500||Total Y&J Yield|
Y charts of the data source.
One of the brakes has been the prevalence of litigation. Since 2013, the company has either settled, lost its judgment, or is in litigation over faulty hip implants, asbestos in its powdered baby talc, illegally marketing its antipsychotic drug, and its creation of a “super poppy” that can contributing to the opioid crisis in the United States.
Despite the legal issues, the company itself has been the model for consistency. Since 2015, revenue has grown by 2.3% to 3.3% each year, while the gross margin has remained between 66% and 70%. Stability can be attributed to diversification. Its consumer healthcare, pharmaceuticals and medical device segments account for 17%, 55% and 28% respectively of last year’s $ 82.7 billion revenue. It is also geographically diverse, with more than half of sales coming from outside the United States.
|Geography||Percentage of 2020 revenue *|
|Western Hemisphere (ex-US)||6%|
Data source: Johnson & Johnson. * Does not add 100% due to rounding.
The tide of underperformance may be turning. Revenue increased 5.5% in the recently released first quarter thanks to 12.2% growth outside the United States. The company has raised its forecast for the full year, anticipating between 8.7% and 9.9% of revenue growth. Beyond the recovery in 2021, Johnson & Johnson is investing to remain a leader in each of its segments.
Like Pfizer, it has a strong drug pipeline. Johnson & Johnson believe it could have 10 new deposits in 2021, including 13 in 2022 and 26 in 2023. Its cancer drugs are a particular bright spot. The company’s oncology drugs generated $ 2 billion in sales ten years ago. In the most recent quarter alone, they shipped $ 3.6 billion and are up 15% year over year.
He also innovates in the material. Among the medical devices it plans to launch this year is the Velys robotic system for knee replacements. It is a unique tabletop device that combines data and scanning to provide information before, during and after surgery.
Johnson & Johnson is the epitome of stability and diversification in the healthcare industry. Despite a solid reputation, the stock has underperformed for a generation and shareholders have had to endure embarrassing litigation. However, with 59 consecutive years of increasing dividends – the stock now pays 2.5% – and innovative products to drive future growth, stock is one of the surest ways to build wealth. ‘an investor can find. The company’s shares belong to the portfolio of anyone who fears a loss of capital but still wants the growth associated with owning shares.
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