Finally, some volatility! Although it appears to have been short-lived, the stock market had a few days of excitement since the -2.5% pullback on Friday September 9th. We were sharpening our pencils in anticipation the pessimism (and buying opportunity) would continue, but the concern about interest rates didn’t materialize and the accounts are close to where they were at the beginning of the month.
“this company is finally boring enough to own.”
However, the long awaited volatility gave us a good reason to choose our next buy, a well-known pharmaceutical company called Pfizer PFE. Josh Peters, CFA from Morningstar recently bought it in his portfolio after coming to the conclusion, “this company is finally boring enough to own.” That’s right, he likes boring cash cows as much as we do.
Pfizer’s stock currently yields 3.5% and Peters expects the dividend to grow 6% – 7% over the next 5 years. He also points out that Pfizer no longer has a major patent (like Lipitor which is now generic) expiring anytime soon and has a number of good drugs in the pipeline to help fund and grow the dividend.
Because of this, we’d like to buy a 3% position of Pfizer for clients during the next pullback. We thought about buying last week but we wanted to be patient and do a little more research before we buy. In the past, we’ve occasionally bought stocks that have gone down right after we purchase them. Then, we buy them again because – if you liked the dress at $100, you’ll love it at $75, and you might buy two at $50! (Meant to be read in Bruce’s voice)
With the stock market at new highs, the election now only 47 days away, and volatility picking up, we think it’s prudent to measure twice and buy Pfizer only once, at the lowest possible price for our clients.
There are a few other stocks we’d like to buy in addition to Pfizer, however, we’re waiting for a -5% pullback before we get too excited. Until then, we’re beginning to call the clients we haven’t spoken with in a while to give updates on accounts and answer any questions. We look forward to speaking with you soon!
Thanks for taking the time to read.
-Tim Porter, CFP®