Billionaire Stanley Druckenmiller’s Healthcare Picks Include Pfizer

Fellow drug manufacturer Eli Lilly & Co. (NYSE:LLY) was another of Druckenmiller’s healthcare picks. Here business has been slipping slightly- revenue and earnings showing very small declines in its most recent quarter compared to the same period in the previous year- with the sell-side forecasting a decline in earnings at least in the medium term: the trailing and forward P/Es are 15 and 20, respectively. The beta is 0.4, in line with Merck’s, and the dividend yield is square between Merck and Pfizer at 3.6%. Renaissance Technologies, founded by billionaire Jim Simons, had 8.1 million shares in its portfolio at the beginning of January (research more stocks Renaissance likes).

Druckenmiller initiated a position of about 720,000 shares in Johnson & Johnson (NYSE:JNJ), another megacap, defensive healthcare company. Specifically, the stock’s beta is 0.5 and the dividend yield is a little above 3%. The trailing earnings multiple of 21 is a bit high for a company whose revenue was up only 8% in the fourth quarter of 2012 versus a year earlier, and we think that we would avoid the stock. Donald Yacktman’s Yacktman Asset Management reported a position of 8.4 million shares at the end of Q4, essentially unchanged from three months earlier. Peer The Procter & Gamble Company (NYSE:PG) has similar characteristics in terms of its beta and yield; while it trades at a small discount to Johnson & Johnson at 18 times trailing earnings, its revenue growth has been even lower and so we aren’t sure it’s a good value either.

Disclosure: I own no shares of any stocks mentioned in this article.