MNC Pharma: Opportunity In The Middle Of A Crisis!
MNC stocks like prized diamonds collected over a period of time and not bought one fell swoop. So be patient but keep a close eye on these two gems!!
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Big Pharma far as I can remember have always been the subject of public suspicion and disdain not only here in India but the world over. They are often seen as monopolistic profiteering corporate giants that make big money by keeping the cost of essential drugs high, making them unaffordable to a large part of the world's population particularly the poor, who can least afford them and most need them. This perception has however changed a bit in the last few weeks as all hope- including those of Governments- are pinned on these Pharma majors. I like everyone else half expect a Sanofi or Pfizer of the world to announce any day now that they have managed to find a miracle cure to Corona virus or at least been able to rustle up a good enough vaccine that will take the sting out of this pandemic that seems to have a stubbornly strong bull market going for it!
Although the world has only recently started cheerleading these companies, I have always favored them as solid all weather investments. While everyone seems to like the desi pharma companies like Dr Reddy’s, Lupin and Cipla.. I have been in a long term relationship with MNC Pharma. While there may be no dearth of fundamental reasons to like them over their Indian peers - the fact that they have strong balance sheets, mostly no debt, leadership in new drug discovery and high income visibility. My reasons for liking them as always are purely technical. I profile here two companies from this stable that are out of the top drawer and will make for great long term investments.
The single most important technical reason to have them in your portfolio is their continued outperformance vis a vis the Nifty and the BSE Pharma index which essentially means that they have been doing better than the broad indices as an investment. As an investor that is what you want. You need to load up on stocks that are beating the markets and quickly weed out ones that perform poorly against the Nifty.
So here you go: Topping the list for me would be Sanofi, the Indian subsidiary of Sanofi- Aventis. While Sanofi is the leader in the $60 billion vaccine market and is hard at work trying to be the first company to make one for the Corona virus, it has a huge array of other drugs in its portfolio besides vaccines and what a glorious chart! A piece of art! solid uptrend with shallow corrections and strong emphatic upswings that point to a sustained multi year uptrend. See for yourself!
Good as these stocks are there should be no rush to buy them as they tend to move slowly and are best accumulated over a few months. One reason you won't find stocks like Sanofi in a typical retail portfolio is because of their high price tag. While it is admittedly difficult buying a stock that trades in five figures, it is important to remember that good things aren't ever cheap! Also, let me bust a myth while I am at it. A Rs. 1000 stock of company A could well be cheaper than a Rs. 10 stock of company B if there are 1000 times more Company B stocks out there! So what you need to look at is Market Capitalisation and not the stock's absolute price-- which is meaningless for comparing between stocks!
Another very strong chart is that for AstraZeneca Pharma, the Indian subsidiary of the Anglo - Swedish pharmaceutical major that is the largest British company now by Market Cap. AstraZeneca is at the forefront of finding a vaccine and has already penned a deal with Oxford University to bring a vaccine to the market in good time. Whether or not its efforts at discovering a vaccine and producing it at scale are successful, the charts of its indian listed subsidiary- the object of our interest- look very impressive. The fact that the stock has had a dream run, is still in the middle of it and has so much going for it makes it a great stock to own.
AstraZeneca too, like Sanofi has beaten the Nifty hands down over the last few years and that trend is likely to continue into the future. The price for AstraZeneca has shot up from Rs. 900 two years back to over Rs. 3000 now! we believe it can continue to grow at this clip for 2-3 years more. Again, MNC stocks like prized diamonds collected over a period of time and not bought one fell swoop. So be patient but keep a close eye on these two gems!!
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