Amgen, Inc. (AMGN): The One Biotech Stock Buffett Should Buy

Page 1 of 2

The biotechnology sector can be a land of immense spoils and incredible heartbreak. It’s not uncommon to see small and midsized biotech companies swing wildly in each direction because of clinical trial data or a decision by the Food and Drug Administration.

These 3 Stocks Could be Tomorrow's High-Yielders

Pros and cons of owning biotech stocks
Last month I presented my case for how the typical long-term investor could use biotech stocks to their advantage. My suggestions entailed focusing on companies with established pipelines, selecting clinical-stage companies that were running a large number of trials with multiple partnerships, or buying a biotech ETF that would take a lot of the guesswork out of your purchase and spread out your risk among a number of companies.

Conversely, my Foolish cohort Brian Orelli last week presented his three reasons a long-term buy-and-hold investor like Warren Buffett would never buy a biotech company. Brian noted that Buffett’s unwillingness to follow a biotech’s upcoming pipeline, biotechs’ wild valuation fluctuations, and their often small size, would make them unlikely candidates to grace Berkshire Hathaway Inc. (NYSE:BRK.A)‘s  portfolio, which is usually looking for heavy hitters to help “move the needle,” as Brian put it.

The Buffett factor
To date, Warren Buffett and Berkshire Hathaway Inc. (NYSE:BRK.A) have been very conservative with their health-care investments, opting to own shares of some of pharma’s biggest names, including Johnson & Johnson (NYSE:JNJ), GlaxoSmithKline plc (ADR) (NYSE:GSK), and Sanofi SA (ADR) (NYSE:SNY).

But, with all due respect to Brian, I think Buffett is missing a crucial piece of the puzzle in his investment portfolio, and that missing piece is a biotechnology investment.

The way I see it, in its simplest form, Buffett values three things: business sustainability, growth, and income. Let’s have a look at how these three values might play into the biotech sector, and ultimately, what biotech company Buffett would be foolish to pass up.

Sustainability
By sustainability, what I’m really focusing on is an established pipeline of drugs already in existence. This would mean that many companies that have one or two drugs approved by the FDA and have the remainder of their pipeline currently in trials wouldn’t fit the bill. Warren Buffett has the “set-it-and-forget-it” type of investing style that only sustainable and established pipelines would satiate. Two names in particular that come to mind here are Amgen, Inc. (NASDAQ:AMGN) and Biogen Idec Inc. (NASDAQ:BIIB).

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!