Are you looking for the next sector to invest in that has the potential to outperform the S & P 500? Look no further than biopharmaceuticals. In particular, large drug and biotech stocks such as Merck, Pfizer, Bristol Myers, Amgen, and Biogen. These companies have been out of favor recently, but that could be changing soon.
Many investors have been hesitant to invest in biopharma stocks due to concerns about lack of new products, patent expirations, and price controls. However, there are several reasons why these stocks may be attractive from a valuation and fundamentals perspective.
Firstly, biopharma companies are highly profitable, with EBITDA margins averaging 38% and net profit margins averaging 24%. In comparison, the S & P 500 companies have lower profit margins. Additionally, the average price/earnings multiple for biopharma stocks is 12.7 times, lower than the S & P 500’s 20.6 times, making them potentially undervalued.
One major challenge facing the biopharma industry is the lack of productivity from research and development efforts. However, the growing use of artificial intelligence (AI) in drug development could be a game-changer for the industry. AI can help speed up the drug development process, identify the best patients for clinical trials, and design more effective treatments.
Companies like Pfizer have already seen success in using AI for drug development, and this trend is likely to continue. By combining attractive valuation and fundamental metrics with the potential benefits of AI in drug development, investing in biopharma stocks could be a smart move for your portfolio.
Stay ahead of the curve by considering biopharma stocks for your investment portfolio. Visit Extreme Investor Network for more insights and analysis on the latest investment trends.