Last year will go down as the year pharmaceutical companies realized that drugs are where it's at.
With that kind of performance, it shouldn't come as much of a surprise that Pfizer
Of course, I'd be remiss if I didn't mention Eli Lilly, which doesn't need to sell off anything because it never diversified away from its core in the first place.
These moves are great because they allow investors to pick and choose which segments they're most interested in. Right now if you want to own Pfizer's drug pipeline, but don't want the animal-health division, you don't really have a choice. In the near future, however, investors won't have that problem.
And if you want to diversify into multiple areas, you can create your own conglomerate by picking the best drug company, the best nutrition company, and the best medical device company for your portfolio.
Let's just hope Pfizer chooses to spin out its segments to give investors more options.
The flip side
But what about Johnson & Johnson
The size also offers diversification. Johnson & Johnson's consumer health division is having a horrible time of late, but it hasn't affected the bottom line much because the company has so many other products to fall back on.
The company is more stable and therefore less risky, but that diversification comes at a cost: Growth areas like high-margin drugs get hindered by the slower-moving segments.
If you want a set-it-and-forget-it stock pick in the health-care industry, Johnson & Johnson is your best bet. But I think investors could do better picking and choosing the best options from a larger assortment of companies.
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