The Fool’s Take
Pfizer’s (NYSE: PFE) COVID-19 vaccine became a bestseller, helping the company reach a record of more than $100 billion in annual revenue in 2022.
But as demand for the vaccine has declined, so has Pfizer’s revenue opportunity — and upcoming patent expirations of other top-selling products have added to Pfizer’s woes, bringing its shares down more than 30% over the past three years.
Pfizer faces some challenges, but it has planned for this moment. It’s finishing up a record period of product launches — attempting to commercialize 19 new products or indications in only 18 months. It predicts recent product launches will add $20 billion to revenue in 2030.
Meanwhile, Pfizer has high hopes for its oncology business after its acquisition of Seagen — a specialist in antibody-drug conjugates. Pfizer has set goals of delivering eight or more blockbuster oncology drugs by 2030, and doubling the number of cancer patients treated by its drugs.
The new growth drivers won’t deliver results overnight, but this seems a promising buying opportunity if you’re a patient investor who wants to benefit from this pharma company’s new era of growth down the road.
While waiting, you can enjoy the dividend, which recently yielded 5.7%. (The Motley Fool owns shares of and recommends Pfizer.)
Ask the Fool
From L.R., Warwick, R.I.: What do you think of the investing strategy I’m considering: Investing in volatile stocks, selling them after they rise a bit and then buying them again after they drop? I’d hold them for only a few weeks or months at a time.
It’s a risky approach that will take a lot of energy — and it may not prove as lucrative as you expect. After all, plenty of great stocks will keep rising for a long stretch, and if you’ve sold early, you’ll be missing out on much of their gains.
Another consideration is that most of your gains will be taxable at the short-term capital gains rate (for assets held a year or less); that’s your ordinary income rate, which could be 12%, 22%, 24%, 32% or more. The long-term capital gains rate is lower — 0% or 15% for most of us, and 20% or more for high earners.
We prefer to build long-term wealth by investing in wonderful businesses at good or fair prices and then hanging on for many years — not weeks or months.
It’s better to just invest in companies you really understand and believe in, aiming to hang on for years. Otherwise, you’re just guessing and hoping.
From R.T. Cody, Wyoming: What’s “profit-taking”?
You engage in profit-taking if you sell a holding that has risen in value. For example, let’s say that you’re up 50% on your shares of Home Surgery Kits Inc. (ticker: OUCHH). If you sell them, you’re taking your profits. If you don’t sell and hang on instead, you’ll be sitting on a “paper” — or unrealized — gain. Selling is when you “realize” your gain.
The Fool’s School
Given the heights inflation reached a few years ago, many of us wonder how we might best counter it in our investing. (While inflation averages around 3% annually over longer periods, it came in at 4.7% in 2021 and 8% in 2022.) It’s vital to keep inflation in mind while planning for your retirement, because even a 3% annual inflation rate can shrink the buying power of your dollars by about half over 25 years. So what might cost you $1,000 at the beginning of your retirement could cost you over $2,000 closer to the end of it.
If you’re not prepared, that can be a big problem, especially since many retirees get by on largely fixed incomes. So what can you do? Well, for starters, you need to understand that with any investment earning you say, 2% while inflation is at 3%, your money is essentially losing value over time. Healthy and growing dividend-paying companies are a good option, as they tend to have stock prices that rise over time while paying dividends that also increase — often at a rate that meets or beats inflation.
Many good companies sport dividends yielding 3% or more. PepsiCo, for example, recently yielded 3.1%, while Chevron yielded 4.3%. Over the past five years, PepsiCo has raised its dividend by an annual average of 7.2%, while Chevron has averaged 6.5%. An easy way to invest in a range of dividend payers is via a dividend-focused mutual fund or exchange-traded fund (ETF). Two examples are the iShares Core Dividend Growth ETF (DGRO) and the Schwab U.S. Dividend Equity ETF (SCHD), which recently yielded 2.2% and 3.6%, respectively — and have offered dividend payouts that increase over time.
Some bonds address inflation, too. TIPS (Treasury Inflation Protected Securities), for instance, are bonds that are set up to factor in inflation. Some annuities allow you to opt for annual increases that can help you keep up with inflation. And Social Security benefits are automatically adjusted annually for inflation.
My Dumbest Investment
From Norm, online: I’ve made many regrettable investing moves since 1996. Some, though, may not be as bad as I initially thought. I think my worst period was during the dot-com craze. I owned some shares of WebMD and Amazon.com, among others. When the bust occurred, my broker called me and said, “Goodbye, Norm, I’m outta here!” Completely discouraged, I sold everything, and in 2003 I started over.
I’ve had some regret about selling my Amazon shares; had I held on to those 50 shares, they would be worth more than $9,000 today. But on review, my current hybrid portfolio of stocks, ETFs, mutual funds and bonds has done very well. Running my numbers is one way to retain perspective. I’ve realized that it’s the aggregate that counts, not the fumbles or missed opportunities.
The Fool responds: Even the best investors make mistakes and don’t capture all possible profits. You’ve done well and learned some great lessons. Note that Amazon had a 20-for-1 stock split in 2022, so your 50 shares would have become 1,000 shares — which would be worth more than $180,000 as of this writing. But it’s indeed smart to focus on what you’ve achieved instead of your missteps — and to look ahead at expected growth.
Who am I?
I trace my roots to the establishment of a brewery in England in 1777. In 1946, the founder of Pan American Airways (“PanAm”) launched a luxury hotel brand bearing my formal name. The Holiday Inn brand launched in 1952 and was the first hotel brand to franchise, in 1954.
These and other hotel chains — such as Crowne Plaza and Candlewood Suites — have ended up under my roof today. I’m now one of the world’s biggest hotel companies, encompassing more than 6,400 hotels with more than 950,000 rooms and employing about 375,000 people.
Who am I?
Don’t remember last week’s question? Find it here.
Last week’s answer: Fortune Brands Innovations