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5. Pfizer Inc. (NYSE:PFE)
Share Price as of June 6: $53.31
Number of Hedge Fund Holders: 79
Pfizer Inc. (NYSE:PFE) is a New York-based pharmaceutical and biotech giant that has spearheaded the fight against COVID-19 through the Pfizer-BioNTech vaccine. The stock is trading at a forward adjusted P/E multiple of 7.83x. This reflects a discount of over 37% from the five-year average forward adjusted P/E multiple of 12.54x.
Pfizer Inc.’s (NYSE:PFE) management is working on increasing innovation as it is moving past the peak in terms of healthy cash flow and bottom line generated by the COVID-19 vaccine and faces the possibility of the patent cliff by mid-decade. One such action taken by the management is the recent acquisition of Biohaven Pharmaceuticals Holding Company Ltd. (NYSE:BHVN) for $11.6 billion in cash on May 10. The New Haven, Connecticut-based company is the maker of NURTEC ODT, which is an approved therapy for the treatment of the episodic and acute treatment of migraine in adults.
“While the level of general turnover abated as we progressed through 2021, it remained high in one area: post-COVID-19 recovery plays. The concept behind this investment thesis was, and still is, straightforward: with the advent of effective vaccines, the path from pandemic to endemic is just a matter of time. As this transition occurs, the estimated excess savings of over $2 trillion built up on U.S. consumer balance sheets will unlock dramatic pent-up demand for experiences, especially global travel. This investment case seemed especially compelling when the Pfizer vaccine positively surprised markets in November 2020. As a result, we made post-COVID-19 stocks (which were trading well below our estimate of recovery value) a sizable theme within the portfolio. We understood this to be a more aggressive tilt in positioning because it required a major improvement in demand to catalyze fundamentals and drive price toward higher business values. While we accepted that recovery would not be smooth and that it would take time to deploy vaccines both domestically and globally, we decided that recovery was the logical path of least resistance and we were being well compensated for these risks.
What we did not account for, however, was vaccine hesitancy and the risk of further infection waves. As a result, the first variant wave, Delta, was a negative surprise to both the market and our team. When the risk surfaced, we immediately updated our probability-driven models and debated how we should react. The resulting conclusion was that the recovery would be delayed and that we should reduce our exposure quickly, subsequently targeting the most aggressive recovery stocks such as cruise lines. We again acted swiftly and decisively to the positive surprise that Pfizer had delivered a high-efficacy antiviral COVID-19 pill. This pill should greatly reduce COVID-19 severity risks globally, increasing the probability of a global travel recovery in 2022. While this is still true, the emergence of the highly mutated Omicron variant set off another infection wave which spurred us to again act quickly and further reduce our risk exposure. This back-and-forth may sound exhausting, but it highlights our compulsion to act if we determine a surprise has a large enough impact on the probabilities that power our valuation-driven investment cases.”
Of the 912 hedge funds in Insider Monkey’s database, 79 funds held a stake in Pfizer Inc. (NYSE:PFE) as of Q1 2022.