Is Pfizer (NYSE:PFE) worthy of attracting Berkshire Hathaway (NYSE:BRK-A)?
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Warren Buffet doesn’t require any introduction, especially in the business world. He is considered the pioneer of investing. Every time he invests in a stock, you can bet on that stock to surge in the coming days. The man who turned 10,000 dollars into a fortune worth billions; Warren Buffet at 84 is still smarter than most of the investor on Wall Street. The reason behind that is simple: he invests in business models rather than stock symbols.
He emphasizes on the long term prospects of the companies and the direction they’re heading rather than the money they’ve accumulated. Buffet is known to hold on to stocks for decades; nurturing them and watching them come to fruition. Buffet is also inclined towards the companies that gives out good dividends and is sophisticated yet less complicated. Berkshire Hathaway (NYSE:BRK-A), Buffet’s conglomerate, usually deals with the financial companies but every now and then it takes an interest in health care companies.
Now we’ll discuss how Pfizer (NYSE:PFE)’s stock can prove to be profitable for Berkshire Hathaway (NYSE:BRK-A). Pfizer (NYSE:PFE) has most of the qualities that Buffet prefers. It is a river of hard cash; its dividends are great; though the company has reduced the dividends (half) in order to boost its cash flow, it is still more than enough to attract Buffet’s attention. Pfizer (NYSE:PFE)’s payout is triple this year than it was in 2000 (0.26 from 0.09 dollars).
Pfizer (NYSE: PFE) was yielding 3.5 percent by the time the market closed on Friday. As compared to S&P 500 companies, which were yielding 2 percent, Pfizer (NYSE:PFE) is faring much better. Pfizer (NYSE:PFE)’s growth is steady. The main focus of the company is oncology drugs; Pfizer (NYSE:PFE) is being hyped as the most convenient pharmaceutical to go to for chronic diseases. Pharmaceutical companies are capable of having stronger price power as compared to the usual financial companies.
These are reasons enough for Buffet to take notice of Pfizer (NYSE:PFE) and invest in the pharmaceutical giant. There’s one big reason Pfizer (NYSE:PFE) might not be able to charm Buffet. The reason is that pharmaceutical companies are too complicated. They contain various hassles such as expiration of patents. Patents are only provided once the drug is approved by the food and drug administration for testing. Since pharmaceutical companies compromise of several in-development drugs, Buffet will be put off by such hassles since he likes to let the stock grow by itself, in the long run, rather than fret over it on a daily basis.
Pfizer (NYSE:PFE) has all the qualities of a company that can withstand the tests of time. The cash flow of the company is steady, dividends are good and there’s enormous pricing power. One thing Pfizer (NYSE:PFE) won’t be offering, or any pharma company for that matter, is convenience. Also there is doubt over long term prospects of pharma companies. They largely depend upon the drugs they develop and the success of those drugs take a lot of time. Pfizer (NYSE:PFE) might get the thumbs up from Wall Street, it might not be able to guarantee Buffet peace of mind.