Eli Lilly & Co. (LLY), Pfizer Inc. (PFE), Merck & Co., Inc. (MRK): These Stocks Are Still Solid Long-Term Picks

I see a similar situation with Merck

Merck & Co., Inc. (NYSE:MRK) recently announced its first-quarter earnings, somewhat disappointing analysts. The result so far has seen the stock price come off by about 6%. Whilst the earnings may not have met analyst expectations, it is important to not buy into the notion (Confirmation Bias), ‘Oh well, we knew it – the growth in big pharma is over, dump the stock’.

Merck & Co., Inc. (NYSE:MRK), just like Pfizer Inc. (NYSE:PFE), is a cash generating powerhouse. Its dividend yield is an attractive 3.80%. It is trading at a forward PE ratio of less than 12 and has an interest cover of a whopping 13.2. I think it is reasonable to say Merck & Co., Inc. (NYSE:MRK) is a financially sound and effective business.

As with Pfizer, what I like about Merck is the breadth and depth of their product pipeline. At a forward PE of 12, Merck & Co., Inc. (NYSE:MRK) seems cheap to me. It has a number of high quality products that are deeply entrenched in their niche markets as well as their pipeline of over 50 potential products at various trial stages. To me, Merck & Co., Inc. (NYSE:MRK) only needs for just a small handful of these potentials to turn out successful and a PE of 12 will suddenly seem grossly undervalued.

After all is said and done, what I (and I hope readers) takeaway from this analysis is that is it not the next 90 days that we, as long-term investors, need to be concerned with. Even the best, most well run companies can have a quarter that is not ideal. As long-term investors it is important to ensure we don’t overemphasize short-term performance. Maintain your focus on the long-term, that is where the value will come from. Leave the short term gyrations to traders!

The article These Stocks Are Still Solid Long-Term Picks originally appeared on Fool.com and is written by Jarrod Bailey.

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