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(US/CHN trade war doesn't matter) Philip
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Posted by (US/CHN trade war doesn't matter) Philip > 2019-05-20 14:30 | Report Abuse
buying pharma/biotech companies are like buying jackpot. most companies unless they are big caps with existing patents are like Indiana jones running through the jungle trying to find the hidden treasure.
They have to jump through dangerous rivers (R&D), boulder traps and spikes (animal testing) and many more traps. Even when they get close, there is always the big bad Nazi who tries to frighten and scare you away (FDA approval), which can take many many years to go through the multiple stages. Most times, it doesn't pan out (Sean connery spent his entire life searching for the holy grail).
Sometimes you hit the jackpot. But even then, gaining the prize doesn't mean you will succeed, as patents have a shelf life before the generics can be introduced into the market. Even companies with a patented drug, if managed badly will still not succeed.
My advice, instead of buying the companies which is burning through cash looking for the answer, why not invest in the companies with a proven answer, well managed with a clear competitive advantage in play.
The risk of losing money then is far lower than the profit making possibilities.
Rule 1: never lose money ( not literally, but conceptually. If you take unnecessary risks, you will lose unnecessary money. compare your 5 year history of those companies versus these:
Pfizer May 20 2014 - USD 29.50, May 20 2019 - USD 41.50, 3.5% dividend
Johnson & Johnson May 20 2014 from 101 to 138.6 today, 2.74% div,
Merck, 20/5/2014 from 56.8 to 76.6, 2.74% div,
Abbvie, 20/5/2014 from 54 to 79, div 5%
Novartis
These companies, if you are new to biotech or pharmas, you could just close your eyes, just buy and hold and average every quarter with your salary over the years and you would not need to worry on catastrophic loss of value.
I have lost count of how many biotech pharma & companies went bankrupt through the years searching for holy grails, while the big pharma continued to grow its profits and dividends year after year after year.
I am sure one of the companies you are following will hit paydirt and make it big, but if you can't make a reasonable analysis which company will do well 5-10 years from now, it would not be a good idea to invest at all in biotech companies.