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Best Pharmaceutical Stocks to Buy in 2021

Author: Mir Kamrul

The Covid-19 outbreak created an unprecedented economic crisis, disrupting people’s lives around the world. The pharmaceutical sector came to prominence as companies raced to produce an effective and safe vaccine. The shares of some (but not all) pharma companies rose in value, thus benefiting those who had the foresight to invest in such stocks. 

In this guide, we look at the top 10 pharmaceutical stocks that might still be worth buying in 2021.

Where Can I Trade Pharmaceutical Stocks?

To trade pharmaceutical stocks, you want a low-cost, user-friendly trading environment. Identifying a regulated broker with the best features and lowest costs can be challenging, so we’ve come up with some broker suggestions.

1
Biogen (BIIB)
Our score
10
The US-Based biopharmaceutical is one of the pioneers in neuroscience and therapies for other disorders
Researchers at Biogen might be close to a breakthrough on diseases like Alzheimer and set to get approval from the FDA
Votatile stock but some experts consider it as a good long-term opportunity
Description:
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2
AstraZeneca (AZN)
Our score
9.3
Approved Covid-19 Vaccine by several official agencies.
In Q3 2020, the company grew its revenue by 3% year over year to $6.58 billion.
AstraZeneca generated around $1.9 billion in free cash flow over the past year.
Description:
Astrazeneca has stocks have seen significant attention since their Covid vaccine was approved for use in the UK and the EU this year. In Q4 2020, AstraZeneca reported 20% growth in adjusted earnings to $1.07 per share. Sales rose 11% to $7.41 billion.
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3
Johnson & Johnson (JNJ)
Our score
8.7
Globally Aging Populations
Covid-19 Vaccine Plans
$377.77 Billion Market Cap
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4
Merck & Co (MRK)
Our score
8.5
Merck & Co was founded in 1891 and is headquartered in New Jersey.
Market Cap of 189.58B as of February 2021.
The company is expected sales to rise 8% to $51.9 billion
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5
BioNTech (PFE)
Our score
7.9
One of world's largest pharmaceutical companies
64th on the 2020 Fortune 500 list of the largest U.S. corporations
Market cap of $202.88 billion
Description:
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What Are Pharmaceutical Stocks?

The pharmaceutical industry is concerned with the research, development, and marketing of medicinal drugs. For investors, the most valuable aspect of this industry is that it is a constant necessity as the world continues to seek remedies for new and existing illnesses. While companies in many sectors such as hospitality suffered during the pandemic, pharmaceutical companies were in demand.

As an investor, you can’t assume that a stock will be lucrative. It could take some years for a pharmaceutical company’s shares to take off (albeit fast and far) when one of its drugs is approved by a regulatory authority. You need to set various criteria to help you identify the potential value of a stock before investing.

To come up with our list of top pharmaceutical stocks, we have crunched some numbers and assessed the future prospects of the companies concerned.

How to Trade and Invest in Pharmaceutical Stocks?

1

Open a Trading Account

It should take only a few minutes to fill out a broker’s online application form with your name, address, email address, and other personal information, although you may also have to upload some identification documents. You can easily fund your account by bank transfer, credit/debit card, or sometimes PayPal.

2

Choose Pharmaceutical Stocks

Using our list as a guide, but backed by your own research, you can navigate the broker’s list(s) of stocks to find the ones you want to buy. You should be able to pull up a price chart for each one to finely tune the timing of your purchase; e.g. to buy on a dip or a price breakout.

3

Place Your Trade

It will be really obvious how to buy the stock at the current market price by pressing the “buy” button (once you’ve entered the number of shares to buy or the amount of money to invest). Alternatively, you can place a limit order — inside or outside of market hours — to buy at a maximum price you specify.

Best Pharmaceutical Stocks to Buy in 2021

Finding the best pharmaceutical stocks (or any other stocks) to buy requires a fundamental analysis of the companies’ future earnings prospects and other key metrics. We have done some of that analysis to come up with this list of pharmaceutical stocks to trade in 2021:

  1. Pfizer [PFE]
  2. Bristol Myers Squibb [BMS]
  3. Johnson & Johnson [J&J]
  4. Gilead Sciences [GILD]
  5. GlaxoSmithKline [GSK]
  6. AbbVie (ABBV)
  7. Supernus Pharmaceuticals Inc (SUPN)
  8. Amneal Pharmaceuticals Inc (AMRX)
  9. Novartis (NVS)
  10. Horizon Therapeutics PLC (HZNP)

Now, let’s look at five of those stocks.

1. Pfizer [PFE]

Pfizer has a solid foundation for both its existing and upcoming products. Its most triumphant achievement recently is the Covid-19 vaccine that has been distributed to countries across the globe, but this has not necessarily been reflected in the share price.

Although Pfizer shares are near the all-time high price first reached as far back as the year 2000, this has been the result of an up-trend that began in 2008.

2. Bristol-Myers Squibb [BMY]

Bristol-Myers Squibb has many medicinal big winners, including blood thinner Eliquis and cancer drug Opdivo, which are likely to be among the five worldwide best sellers within the next few years.

Like Pfizer, BMY shares are near their all-time high price and they have been in an uptrend — a series of higher highs and higher lows — between March 2020 and June 2021.

3. Johnson & Johnson [JNJ]

Johnson & Johnson has medicines to drive future growth, including Stelara and Tremfya immunology drugs and the Darzalex prostate cancer medication. J&J is also the developer of a vaccine that was declared effective against Covid-19.

Despite occasional corrections, Johnson & Johnson shares have been in an uptrend since as far back as 1985, so this stock has been kind to shareholders.

4. Gilead Sciences [GILD]

Gilead Sciences is a research-based American biomedical company. In October 2020, the US Food and Drug Administration (FDA) approved the company's remdesivir antiviral drug to treat patients with Covid-19 who required hospitalization.

Gilead Sciences shares really took off between 2011 and 2015 before beginning a six-year bear trend. The share price improvement between December 2020 and June 2021 might mark a turning point. Regardless of any share price appreciation, this stock pays dividends.

5. GlaxoSmithKline [GSK]

GlaxoSmithKline manufactures and sells vaccines, drugs, and other healthcare products. The broad range of activities makes it a reasonably stable pharmaceutical stock with a diverse risk profile.

GSK shares have traded in a wide range for years with no clear long-term uptrend or downtrend. The attraction for investors is therefore the dividend payments. At the time of writing in June 2021, GSK has a forward dividend yield of 5.5%.

Expert Tip on Investing in Pharmaceutical Stocks

Buying stocks is one thing but selling them is another thing. If you don’t sell when you want to, you’ll end up selling when you have to. So, it might be a good idea to decide at the outset when you intend to sell a stock: when the price reaches a certain level, when a fundamental metric becomes unfavourable, or… never!
- Mir Kamrul

Why Invest in Pharmaceutical Stocks?

Many pharmaceutical stocks benefited from the Covid-19 pandemic, and some may continue to do so as new virus variants continue to emerge. Regardless, people will always have health issues that require medications. However, many startup pharmaceutical companies come to nothing when their breakthrough drugs fail to gain approval. Therefore, it’s more a matter of which pharmaceutical stocks to buy rather than whether to invest in pharmaceutical companies at all.

Frequently Asked Questions

  1. From Pfizer to AstraZeneca, there are several good pharmaceutical stocks whose companies have stood the test of time. Remember that you don’t have to pick just one, because it’s always a good idea to diversify, including stocks in other sectors.

  2. It depends on the kind of pharmaceutical company. Some startups could see their shares really take off if a new wonder drug gets approved, but there are many failures for every success. The big pharmaceutical stalwarts may be better investments as stable stocks that pay dividends.

  3. Anyone who’s eligible for an online brokerage account can invest in pharmaceutical stocks as part of a diversified portfolio.

  4. Beginners should strive to build a diversified portfolio by investing in a range of stocks and other uncorrelated assets. Never allocate more than 2% of your total funds to any single stock, and never invest more than you can genuinely afford to lose.

  5. Big pharmaceutical stocks should be bought based on their fundamental metrics such as the dividend yield, but technical analysis (looking at a price chart) might help you fine-tune the timing of your purchase.

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