Best Stocks for 2008: Biovail (BVF) for capital gains and yield

Posted Dec 26th 2007 1:00PM by Steven Halpern
Filed under: Newsletters, Canada, Stocks to Buy, Best Stocks for 2008

For 25 years, Steven Halpern, editor of TheStockAdvisors.com, has surveyed the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is one of 100+ ideas in the Best Stocks for 2008 report.

"My favorite speculative stock for 2008 is Toronto-based Biovail (NYSE: BVF)," says Nilus Mattive, editor of Dividend Superstars.

"The company makes branded and generic drugs that are delivered orally. It used to concentrate on research & development for other companies, but lately it's become more of a fully integrated pharmaceutical concern.

"Some of its products are marketed and sold by other companies -- a good example is its pain medication Ultram ER, which is marketed by Johnson & Johnson.

"Investors have punished Biovail because of development setbacks in BVF-033, one of the company's most promising compounds. The FDA issued a non-approval letter, and more recently said it would not be examining newly submitted data until April. Biovail is also dealing with intensifying generic competition in other product lines.

"However, all this bad stuff is priced into the stock. Meanwhile, any positive development in the spring could launch the shares back into the mid-$20 range virtually overnight. Until then, the company will pay you to wait.

"Though its dividend history only goes back a few years, Biovail is currently paying a quarterly per-share dividend of $0.375. Given the current uncertainty, I can't say these checks are a sure thing, but CEO Dr. Douglas Squires has told the market that the company has 'no intention of changing its current dividend policy.'

"Even if Biovail cuts its dividend back to the 2006 quarterly rate of $0.125 a share, that would still be a better yield than you'll get from the S&P 500. If it maintains the payment as promised, you'll be getting a very nice annual return just from the dividend.

"And if the stock finds its way back to the mid-$20s, you'll record some big capital gains to boot. Bottom line: Biovail is an aggressive play for capital gains and a high yield. But, in my view, the potential rewards are far greater than the risks."

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