Some decisions that we make lead to second-guessing ourselves. We wonder whether or not we made the best choice. But other decisions are ones that we can feel really good about. The facts are so compelling that we know that the move we made was the smart thing to do.
I think that investing in Bristol Myers Squibb (BMY -0.49%) definitely belongs in the latter category. Here's why you're smart to buy BMS stock right now.
The COVID-19 outbreak has affected nearly every decision we make these days. That's especially true for which stocks we buy. Many investors are flocking to stocks of companies that are in the best position to weather the storm.
Bristol Myers Squibb is among the stocks that are, at least for the most part, coronavirus-proof. Nearly all of the big drugmaker's products should enjoy sustained strong demand regardless of how long the pandemic lasts.
Let's look at BMS's three top-selling products in 2019. Will people quit taking blood thinner Eliquis because of worries about COVID-19? Will cancer patients opt out of being treated with Opdivo, an immunotherapy that has saved many lives? Will individuals suffering from rheumatoid arthritis decide to forego taking Orencia? The obvious answers to all three questions are no, no, and no.
It's a similar story for most of Bristol-Myers Squibb's other drugs. This reality is a major reason pharma stocks like BMS haven't been hit as hard as most other stocks during the coronavirus crisis.
Granted, BMS has been affected in some ways by COVID-19. The company's sales team isn't calling on physicians in person, which could have some impact on sales. BMS has also temporarily suspended or postponed some clinical trials. And its share price did plunge more than 30% at one point during the market meltdown and is still down around 10% below its highs from earlier this year.
Still, for investors looking to buy a stock that has held up pretty well during a market crash that is unprecedented in its rapid decline, Bristol Myers Squibb looks quite appealing.
Hitting the trifecta
Some stocks will perform well while the coronavirus pandemic continues but will likely be laggards afterward. Not Bristol Myers Squibb. Investors who buy the stock will hit the trifecta of a combination of strong growth prospects, an attractive valuation, and a solid dividend.
BMS's growth prospects look better than they've been in a long time thanks in large part to the company's acquisition of Celgene in late 2019. The Celgene purchase brought blockbuster drugs Revlimid, Pomalyst, and Abraxane into BMS's lineup. All three drugs continue to enjoy sales momentum.
Bristol Myers Squibb also gained several promising new drugs with the Celgene buyout. I'd put recently approved multiple sclerosis drug Zeposia at the top of the list. Beta-thalassemia drug Reblozyl is another likely winner. More successes should be on the way. BMS hopes to gain regulatory approvals for cancer cell therapies ide-cel and liso-cel as well as picking up additional approved indications for Zeposia and Reblozyl.
Not all of BMS's growth prospects are due to the Celgene transaction, though. Market researcher EvaluatePharma ranked Eliquis and Opdivo among the world's top five best-selling blockbusters of 2024. Sales are also growing briskly for multiple myeloma drug Empliciti and cancer immunotherapy Yervoy.
Shares of Bristol Myers Squibb currently trade at less than 10 times expected earnings. I think the stock is ridiculously cheap at that level, especially considering its tremendous long-term growth prospects.
Then there's the dividend. BMS's dividend yield stands at 2.9%. The company quickly put to rest any worries that the Celgene acquisition might negatively impact its dividend program by boosting its dividend payout by 9.8% in December 2019. I fully expect more dividend hikes in the future as BMS' earnings grow.
We've all made dumb moves at some point in our lifetime. I've personally made some stupid investing decisions over the years. But buying shares of a company that's largely immune to the impact of COVID-19, has strong growth prospects, pays a great dividend, and is available at a bargain price? That's smart. Really smart.