A quick, but brief update from my side. I just wanted to let you know that I initiated a position in Bristol Myers Squibb ($BMY).
This might come a bit as a surprise to people that had tuned-in into my first episode of Sunday with eDGI.
In that episode I was just sharing my brief analysis about the company and I mentioned very specifically that I might consider investing in it if no other opportunities presented itself.
And this is exactly the case. I literally thought last Friday: what the heck, don’t overthink eDGI, just initiate a position.
Bristol Myers Squibb is now a tier-4 company in my portfolio allocation strategy. I have replaced it for British American Tobacco, because my wife does not agree to own tobacco stocks in our portfolio.
I initiated the position at $62.10 per share.
Having said that, let me explain a bit more about why i bought Bristol Myers Squibb.
Why I bought Bristol Myers Squibb
First of all, I really liked the valuation of the company related to it’s current share price when I was analyzing it.
I truly believe that the risk vs reward is out of balance related to the strength of the pipeline, especially after the Celgene acquisition.
However, the share price is not that off from my fair valuation and this is a correct observation.
I would like to call out though that my fair valuation is already very conservative, because I deducted about 6 Bln in relation to the continuous R&D amortization.
Many other analysts ignore such kind of costs, because it’s an industry practice. This is the reason why you will often see higher fair valuation estimates for $BMY compared to mine.
I am rather conservative though!
At the same time I want to highlight that this is a new position in the portfolio. I don’t necessarily need to have a heavily undervalued price when starting a position.
What is more important to me is to initiate a small position so that I start to further observe and follow it.
And this is why I really bought the company.
It’s simply on my radar right now and I know what my fair value price is.
Hence, I will feel very comfortable to double down on this investment if the stock would drop by 10% to 20% somewhere in the upcoming months.
$BMY stock on a page
Let me share with you also my company one-pager to provide you insights in what I like about the company without redoing the analysis which I already did in the video.
Based on this analysis, there are 2 main aspects that I will be monitoring regarding $BMY in the upcoming quarters and into 2022:
- The debt / equity is on the high end due to the Celgene acquisition. I need to see the debt / equity ratio decline in the upcoming quarters.
- Drugs going off-patent are being replaced by new drugs in the pipeline according to BMY’s own expectations (see pic below).
Other than that I feel quite comfortable about the company.
I just wanted to quickly let you know that I initiated this new position in my portfolio. I feel happy with the acquisition, but it stays a very small position in my portfolio.
Companies like Johnson & Johnson, Roche, Novartis and Medtronic form the anchor of my portfolio. I don’t expect Bristol Myers Squibb to come any close to that for now.
Having said that, let’s cross fingers for any upcoming opportunities to average down in the upcoming months
European Dividend Growth Investor