Pfizer Added to Goldman’s Conviction Buy List

Aug 30, 2011
J. Webster
Comments Off on Pfizer Added to Goldman’s Conviction Buy List

These days, the stock market is like floating on a river in a tiny inner tube with white water rapids around every corner. You’re bound to tip over and drown or if you get lucky just make it through by luck and gumption.

However, there’s a way to survive the rough water in the market, and that’s through dividend yielding stocks. Pfizer is one that you might want to keep on your radar. Right now the stock (PFE) has a dividend yeild of 4.25% and sits at a little under $19 per share. Plus, the stock was recently added to Goldman Sachs vampire squid of a conviction buy list. Here’s the full details from Barron’s:

Goldman Sachs added Pfizer (PFE) to it’s Conviction List this morning, calling the pharmaceutical giant a “dislocated Buy opportunity.” Goldman analyst Jami Rubin sees 32% upside for the stock to a $22 price target based on 9.8 times Rubin’s 2012 EPS estimate.

Rubin cites a handful of reasons for the upside. Notably, an encouraging second half pipeline – with Apixaban and Tofacitinib scheduled for late-stage trials at the end of August and early November with a combined potential to hit $3-$4 billion in annual sales.

Also mentioned were Pfizer’s large and growing cash balances that afford “tremendous flexibility” to management’s ability to deliver value to shareholders through dividends, share buybacks, spin-offs and divestitures.

Since July 7, the stock sold off 19.8% (versus a 10.5% drop by peers 16.4% for the S&P 500) after management’s announcement of a spin-off or sale of Pfizer’s animal health and nutrition business. Rubin believes expectations were unreasonable and now a full break-up is unrealistic.

If you’re able to buy chunks of the stock on the dips, you might manage to get the stock at a yield of close to 5% and earn money while the stock rises to Goldman’s target price of $22 per share. This is the kind of stock that lets you earn money while you sleep soundly, not worried so much about what rough water lies ahead.

What do you think?

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