Young, up-and-coming stocks like Curevac are always very popular on the stock market. But in addition to a great opportunity, they naturally also harbor greater risks. This was recently made clear by the example of Curevacs, whose vaccine initially appeared very promising, but now failed in the crucial phase III study. Warren Buffett bought AbbVie stock instead.
Warren Buffett is betting on AbbVie stock
Warren Buffett can no longer invest in small businesses because of the size of Berkshire Hathaway. But even if he could, he would avoid speculation and instead focus on solid stocks. For example, he invested in AbbVie last year (2020).
The stocks seem unspectacular at first, but Warren Buffett has already made money from them. The American pharmaceutical and biotech company from North Carolina (Illinois, USA) owns various funds that generate billions in sales. Its areas of application include, for example, arthritis, testosterone level treatments, kidney disease, Crohn’s disease, thyroid disease, psoriasis, Parkinson’s disease, HIV and cystic fibrosis.
Although patent protection for some products will expire in the coming years, AbbVie continues to develop and will close the gaps with new drugs.
Pharmaceutical stock with solid development
The results rose steadily between 2011 and 2020. AbbVie’s sales increased from 17,444 to 45,804 million US dollars. Operating profit increased from $ 3,620 million to $ 11,363 million. AbbVie has a high net profit margin of 10.1% most recently (2020). Warren Buffett will also be impressed by the high cash flow of 17,588 million US dollars (in 2020).
As we know, he always pays attention to the valuation of his shares. AbbVie isn’t expensive with a dividend yield of over 4.3% (06/17/2021). The payout has also risen steadily since 2013 from 1.6 US dollars per share to most recently 4.96 US dollars per share. Incidentally, it is paid out quarterly.
So far, the share has also developed solidly and better than the DAX. While the index has risen by around 102% since the beginning of 2013, AbbVie shares have already gained almost 188% (June 17, 2021).
In the first quarter of 2021, AbbVie continued to increase revenue from $ 8,619 million to $ 13,010 million. Profit improved from $ 3,010 million to $ 3,553 million. AbbVies CEO Richard A. Gonzalez said: “Our new products show an impressive performance. In the next two years, we are close to getting market approval with more than a dozen new products or indications. Including five in 2021. “
So despite the biosimilar competition, AbbVie’s future looks positive. For 2021, the earnings outlook was recently raised from $ 12.32 to $ 12.52 per share to $ 12.37 to $ 12.57 per share.
The article Warren Buffett relies on this biotech stock instead of Curevac shares was first published on The Motley Fool Germany.
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Christof Welzel owns shares of Berkshire Hathaway. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: short June 2021 $ 240 call on Berkshire Hathaway (B shares), short January 2023 $ 200 put on Berkshire Hathaway (B shares), and long January 2023 $ 200 call on Berkshire Hathaway (B shares).
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