Bruce Berkowitz is Bullish About Eli Lilly $LLY

Bruce Berkowitz, founder and manager of the Fairholme fund has had a change of heart. Berkowitz has gone from bull to bear on pharmaceutical stocks.

Bruce Berkowitz Bullish on Pharmaceuticals in the First Quarter

Bruce Berkowitz was decidedly bullish on pharmaceutical stocks in the first quarter, buying new positions in several companies. Specifically, he bought a positions worth just over $7 million in each of these four pharmaceutical companies – AstraZeneca (AZN), Bristol Myers Squibb (BMY), GlaskoSmithKline (GSK) and Eli Lilly (LLY). The stocks did fairly well in the first two quarters of the year. AZN returned 12.46% from January to the end of June, BMY returned 26.49%, GSK returned 19.15% and LLY returned 13.93%. Each company returned 10 percentage points or more higher than the market – the SPY returned 2.69% over the same period.

Bruce Berkowitz Kept his LLY Position

Bruce Berkowitz decided to sell out of his pharmaceutical positions in the second quarter, all except one  according to GuruFocus – Eli Lilly (LLY). One possible reason for keeping LLY is its high dividend. The company offers 5.1% compared to the 4% offered by BMY, 4.9% by GSK and 3.2% by AZN. LLY also has one of the lower P/E ratios of the four, boasting 9.07 to BMY’s 16.59 and GSK’s 22.56, suggesting the stock could be underpriced. LLY also has the lowest enterprise value relative to its free cash flow at 6.84, compared to BMY’s 13.03, GSK’s 20.14 and AZN’s 8.04.