Promising Stocks in the Bargain Bin: Pfizer

Of all the tidbits of insight I've heard over these crazy months, the most telling came from an investor who appeared on CNBC last fall. In all seriousness, he advised, "There're only two positions to be in right now: cash and fetal."

Sure, it's bad out there. Many companies that overleveraged their balance sheets are permanently impaired and will likely never rebound. (Banks, I'm looking in your direction.) We had an unprecedented boom; now we're in the middle of an unprecedented bust.

Nevertheless, history tells us time and time again that market panics and forced sell-offs indiscriminately throw the good out with the bad. The frenzy over financial markets, and the "sell-now-ask-questions-later" mood of global investors, are creating the kind of opportunities not seen in decades for bargain-hunting investors.

Using the wisdom of our 130,000-member  CAPS community, I've found what might be one of those bargain opportunities: Pfizer (NYSE:PFE).

Data from Motley Fool CAPS and Capital IQ, a division of Standard & Poor's, as of March 25. TTM = trailing 12 months.

Pfizer is being blasted for its pending buyout of Wyeth (NYSE:WYE), perhaps for good reason. There's no use paying top dollar for a monstrous acquisition when previous monstrous acquisitions didn't pan out. Fool me twice, shame on me, right?

As fellow Fool Robert Steyer wrote earlier this year, "[Analysts] say Pfizer must make a big, bold buy to reverse course on its skidding stock and to blast it out of its revenue doldrums. Here's my advice: Don't do it."

Fair enough. Being big just for big's sake is rarely a path to prosperity. Just ask Citigroup (NYSE:C).

That said, some members of our CAPS community actually see a few rays of light emerging from this acquisition. A few think the synergies of the deal will turn out better than the consensus assumes. As CAPS member umemtigers wrote:

too many analysts and pundits think they know too much about the drug market and what companys like [Pfizer] should or shouldn't do. based on history of megamergers, the [Pfizer/Wyeth] deal will be a challenge to integrate. but assuming they have the right plans and execution, this merger creates an incredible amount of synergy, and not just costs. the [Wyeth] pipeline of drugs and the areas they focus in are perfect compliments to [Pfizer]. the combination of intellectual property and general compound knowledge should yield awesome drug solutions. the ability to eliminate cost duplication in r&d, sales/mktg and g&a will likely be beyond whatever the companies report. combining the bottom lines of the companys and multiplying the result by as much as 1.5 is likekly where a proforma shakes out.

Despite appalling stock performance over the past decade, Pfizer's internal well-being might not be as decrepit as pessimists think. CAPS member JohnPRutledge explained this view earlier this month:

Pfizer's share price has been punished for its imperfect drug pipeline, but its pipeline isn't entirely devoid of revenue growers --- and, in any event, who says a company has to grow organically rather than via the [Cisco (NASDAQ:CSCO)] model (i.e., acquire the proven best at a premium to avoid the losses associated with internal R&D and the natural failure rate that follows from that process). The demographics of our fair country and the cash on hand and borrowing power of this juggernaut have made it a must-have for my portfolio.

Your turn to chime in
What do you think about this megamerger? Will its debt load be too burdensome? Will this simply cement Pfizer's position as a big, bumbling, giant? Or will the merger turn out to be a smart move?

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