Have the mavens of the market scared you out of owning individual stocks? Do you take pride in just owning index funds and are frightened of taking down a piece of a great American company?
Then stop listening to me.
I have nothing you want to bother with.
But if you are like me and you believe that owning index funds are a must but you can have some Mad Money set aside to own five stocks in as diversified portfolio as you can get, than this Bud's for you because I am going to teach you the soundness of my methods.
Again unlike the proselytizers of index funds, I am most decidedly NOT urging you to own nothing but individual stocks. I acknowledge that there could be more risk to owning a stock than the S&P 500. But you must also acknowledge that you are buying the good with the bad in an index fund and I think it's worth assessing, for one moment, the joy of hitting the lottery, a lottery, I think which is rigged in your favor because a little bit of luck and a lot of homework can go a long way to make Big Money out of Mad Money.
Let's just look at today's trading in one segment of the market, health care. This morning we learned, out of nowhere, that Biogen (BIIB) , in conjunction with the FDA, will be working to get approval for a drug, aducanumab, that represents the first realistic hope to fight Alzheimer's.
This is shocking news on many levels. First, like many other drug companies, Biogen's been working on an anti-Alzheimer's drug for years. Every company that has tried to come up with a drug that could be the holy grail of medicine has failed. In 2012 after spending millions of dollars, Johnson & Johnson (JNJ) failed with its try to slow memory loss and dementia. The two premier drug companies scrapped the trials. Then, after years attempts, Lilly (LLY) scrapped its efforts to conquer the disease when it showed no progress in stopping memory loss.
Then in March, Biogen halted late stage trials for aducanumab, which was the last best hope for slowing down a disease that currently grips more than 5 million people in this country, but perhaps much more important, anyone fears getting the disease as they get old.
Given how prevalent it is you could argue that everyone would be on this drug.
Then, in what may be the most astounding turnabout in the history of medicine, Biogen announced today that the drug's working, that's right a long duration, high dose administration is showing just the sign that matter: better cognition, and the ability to handle some of the everyday daily needs like conducting personal finances, performing household chores, such as cleaning, shopping and doing laundry and independently traveling out of home. Biogen appears to be resuming trials after meeting with the FDA first in June and then on Monday. Yes, the FDA is encouraging Biogen to proceed with the tests.
As Alfred Sandrock, the company's Executive Vice President of Research & Development and Chief Medical Officer, said on today's call: "We believe that these positive results for aducanumab represents a turning point for patients, caregivers, physicians and scientists in the fight against Alzheimer's disease."
This is nothing short of astounding. If this drug works and the side effects are minimal it could easily be the biggest drug in history, a blockbuster to end all blockbusters. No wonder the stock of Biogen rallied more than 25% or $63.
But it might not be done. So many analysts have lost clients' money that almost all of them have holds on the stock. There are even two prominent sells. While the stock has had a big move it is still one hundred points below where it was when this drug was just a hope. That seems very wrong given, one, it is a profitable company and two, who can possibly keep a sell on this darned thing? You want to keep a sell on the stock of a company that could produce the biggest blockbuster of all time?
I bring out the full story of what happened to Biogen today because lightning is never going to strike your index fund. Never. Ah hah, the index fund addicts would say, who is to say that you wouldn't be stuck in some loser here, a company that can't possibly keep up with the averages. I think that, too, is ridiculous. Biogen is a fine, very profitable company, with a good balance sheet and a couple of terrific franchises, including an excellent anti-MS line, that make it so it would be a reasonable stock to own without this new drug. It is not WeWork.
That's why I think the move isn't over.
Too abstruse? There's a guy we have on all of the time, Michael Neidorff, the CEO of Centene (CNC) , which is a managed care company that many think provides the lowest cost yet good health care to Medicaid and Medicaid related programs. I put him on often not just because he is the most informative person I deal with on health care. But because his stock is incredibly cheap. Today the company reported a fine quarter and its stock rallied almost 8%. I mention it because, like the stock of Biogen, this one's got a lot more room to run. It's totally domestic, it's a winner in any system other than single payer which I have said endlessly would be almost impossible to get passed in Congress even if Bernie Sanders were to win the presidency.
Finally there's uber Cramer fave, Bristol-Myers (BMY) . For the longest time we have heard Merck's (MRK) Keytruda anti-cancer franchise beating that of Bristol-Myers. Today Bristol revealed that its Opdivo and Yervoy medicines, when taken together, met the end goal of extending the life of untreated lung cancer patients.
I think that this immunotherapy win is still one more reason to own the stock of Bristol-Myers which is buying Celgene (CELG) in what will be an incredible combination. And yet the company sells for less than 12 times earnings. I have been urging people to buy the stock of this company run so ably by Dr. Giovanni Caforio. I have been a broken record and I feel very lonely.
No matter, with its anti-cancer franchise so strong, and its management so brilliant, this stock can make you a lot more money than your index fund and still give you a 3% yield. You think there's a slowdown. Buy Bristol-Myers. You think there's no hope to the trade war? Buy Bristol-Myers. You think Brexit's going to wreak havoc on the world's economies. Buy Bristol-Myers. You think the Fed is going to hike or isn't going to hike, buy Bristol-Myers.
Now I will say it a third time. Own index funds. But I think everyone has a right to hit it big, as you can still in Biogen. Everyone has the right to make money off managed care, especially because it is probably your biggest bill. And everyone has the right to own the stock of a company with a critical cancer breakthrough when, sadly, the anti-cancer franchises are the richest of all.
I didn't mention the other stocks I have flogged endlessly: Procter & Gamble (PG) and Disney (DIS) , because despite a spectacular quarter from P&G, a terrific tie-up with Verizon (VZ) for Disney's plus over the top service, neither is cheap.
And, you could easily argue, how about the shelling of Merck from the Bristol news? How about the collapse of the stock of Disney partner Hasbro (HAS) ? Wouldn't those kill your portfolio? Nah. You are still up 6% on Merck, plus a 3% dividend and even though Hasbro's been clubbed its stock remains up 23%.
Yes, while I don't blame anyone who doesn't have the time or the inclination to do the homework after you buy any stock, I want you to remember that you have every right to try to make more money with your money than you are making. It's buying a Biogen, a Centene, or a Bristol-Myers that could do just that for you.