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Why Bristol-Myers Squibb (BMY) Stock is a Compelling Investment Case

On July 14, 2020, Wedgewood Partners released its Q2 2020 Investor Letter, a copy of which you can download here. The Fund returned 27.13% for the second quarter of 2020. Meanwhile, the benchmark Russell 1000 Growth Index and the Russell 1000 Value Index gained 27.84% and 14.29%, respectively. You should check out Wedgewood Partners’ top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash.

In the said letter, Wedgewood Partners highlighted a few stocks and Bristol Myers Squibb Co (NYSE:BMY) is one of them. Bristol Myers Squibb Co (NYSE:BMY) is a pharmaceutical company. Year-to-date, Bristol Myers Squibb Co (NYSE:BMY) stock lost 10.4% and on July 13th it had a closing price of $57.75. Here is what Wedgewood Partners said:

“Clients will remember that our position in Bristol-Myers Squibb originated in that Company’s acquisition of our former holding Celgene. We have held this position since the acquisition closed in November last year, and we added to our holdings in the second quarter, after excellent first quarter results and a reiteration of 2020 and long-term guidance.

The stock has been trading at a very cheap valuation for some time; we believe this is a combination of disgruntled Celgene shareholders deserting the stock after they were lucky enough to have been bought out by Bristol, and disgruntled Bristol shareholders who were not happy with the acquisition of Celgene. We think it may take a little while for a fresh group of shareholders to take a fresh look at the company, although we do believe this process is underway already. We view Bristol’s acquisition of Celgene very positively – not least because we were long-suffering Celgene shareholders ourselves – as we believe Bristol basically stole the business at a very attractive price, and we have already seen Bristol handle Celgene’s promising pipeline much less ineptly than it had been handled under prior management. We view the combination of Bristol’s and Celgene’s existing drugs, plus a regular string of positive developments from both legacy pipelines to form a global biopharma leader in cardiovascular, hematology, immunology and oncology disease, will see the market warm to the stock over the next couple of years – and likely sooner.

A more recent worry for Bristol, and for the entire drug sector, has been a surge for Democratic presidential candidate Joe Biden in the polls, with Democrats generally viewed as foes of the for-profit healthcare sector. While we acknowledge the risk to realized drug pricing, in particular, we believe a company such as Bristol-Myers Squibb, with a multitude of existing and potential pipeline drugs, is less at risk than a company dependent upon one or two drugs, and/or pricing for those drugs, for its financial health and growth. We also believe that drug pricing and political risk mostly have been priced into the industry as an eventuality for some time now, although we admit the market has a very short attention span and tends to get “surprised” constantly by things it should know already. Healthcare is not the only industry exposed to political risk, and we believe the market should weigh the political risk in this stock against political risks elsewhere, as well as the very real economic risk to demand for most industries as a result of our ongoing pandemic, whereas the Company’s product demand will remain relatively steady.

We believe the pandemic has been and will be firmly negative for the vast majority of the economy, and fundamentals may remain depressed in many portions of the economy for the foreseeable future. With that as a backdrop, we view the Company’s recent reiteration of its growth targets through 2022, along with its extremely strong recent results, positively. A company that is able to come through this crisis relatively unscathed – while delivering double-digit percentage earnings growth – should catch the market’s attention.”

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In Q1 2020, the number of bullish hedge fund positions on Bristol Myers Squibb Co (NYSE:BMY) stock increased by about 3% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with Bristol’s upside potential. Our calculations showed that Bristol Myers Squibb Co (NYSE:BMY) is ranked #9 among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. You can subscribe to our free enewsletter below to receive our stories in your inbox:

Disclosure: None. This article is originally published at Insider Monkey.