"Billionaire" and "successful hedge fund manager" are titles that carry significant weight on Wall Street. These and others apply to Ken Griffin, CEO and founder of Citadel. It's no surprise that investors and analysts carefully scrutinize the hedge fund's every move, of which there were several noteworthy during the fourth quarter.
One of them had to do with Citadel's position in the pharmaceutical giant Eli Lilly (LLY +1.83%). Ken Griffin and his team increased their stake in this leading drugmaker by 184%. Should investors follow Griffin's lead and buy (more) shares of Eli Lilly?
It was a good time to buy
Griffin and his team might have picked a good time to purchase more shares of Eli Lilly. Though it performed well in the first half of 2024, as it had been doing since the decade started (and before), Eli Lilly lost some momentum during the second half of the year. While still strong, its financial results were not quite as impressive as the market hoped. And when richly valued growth stocks fail to meet Wall Street's expectations, the result is usually a dip in its share price.
Eli Lilly has rebounded somewhat since, but how long will that last? Macroeconomic factors, including President Trump's trade wars, are rocking equity markets. Eli Lilly has, so far, not escaped these troubles. Is it worth waiting for an even better entry point to invest in Eli Lilly?
NYSE: LLY
Key Data Points
Can Eli Lilly climb higher?
It's hard to untangle all the economic factors beyond Eli Lilly's control that could drag down its stock price in the next few weeks. It's also not possible to know whether the stock market's recent dip will last. Maybe it will turn into a full-blown bear market, or equities will bounce back quickly.
So it's best to decide whether Eli Lilly's shares are worth buying based on the company's prospects, not based on how the market will behave through the rest of 2024 -- because one thing is for sure: Equities will deliver solid returns in the next decade, regardless of what happens tomorrow or two weeks from now.
So is Eli Lilly's stock worth doubling down on? I think it is, for several reasons. Let's consider just three of them. First, Eli Lilly's portfolio of medicines is currently helping drive top-line growth the likes of which are rare among pharmaceutical giants. In the fourth quarter, the drugmaker's revenue increased by 45% year over year to $13.53 billion. If the healthcare leader's sales had grown one-third as fast as they did, that would still have been a robust performance by industry standards.
Nor is it the case that Eli Lilly relies only on its diabetes and weight loss medicines, although they are doing much of the heavy lifting. In the fourth quarter, the company's cancer drug, Verzenio, reported sales of $1.6 billion, up 36% year over year. Eli Lilly's immunosuppressant Taltz racked up revenue of $952 million, 21% higher than the year-ago period. Eli Lilly's top line will continue growing at a good clip for a while, especially as newer products start contributing.
Second, Eli Lilly has an exciting pipeline. Even with mounting competition in weight loss, the company's candidates in the field look better than most. Eli Lilly is so good at developing medicines in this area that even the ones it licenses out are delivering better phase 3 results than most.
That's the case with mazdutide, a GLP-1 candidate Eli Lilly licensed out to China-based Innovent Biologics. Mazdutide aced late-stage trials last year in diabetes and weight management. Eli Lilly still has plenty of promising candidates of its own in this area, and it is also working on exciting programs outside its core expertise. There should be plenty of brand-new drugs in the company's portfolio in the next five years.
Lastly, Eli Lilly is an attractive dividend stock. The drugmaker's payouts have increased by 200% over the past 10 years. There is more where that came from given its conservative payout ratio of 44.2%. So whether it's for growth or dividends, Eli Lilly is a top pick. Investors can safely follow Griffin's lead and buy (more) shares of the company.
