Are you looking for stability in a down market? If you come across Merck & Co. (NYSE: MRK), you found it!. Yes, I have been a Merck cheerleader the past few years and I think it is one of the safe havens (how daring of me) for 2008. In fact, the large pharmaceutical companies have traditionally been safe havens when the stock market is under stress.
As I type away today, the market is down again, no it's up, no it's down -- It finally ended higher with a nice gain, but Merck has been going only up, closing today at $60.50. The stock could actually trade horizontally this year, or offer only a slight gain over the year. Given the negativity in the market, that might be just fine when you add in Merck's dividend.
Below is Merck's five-year chart, which indicates the real time to buy was during the height of the Vioxx scandal in the fall of 2004, although you would have done fine almost any time in the past three years. The stock has not fully regained its past glory but it is heading there.
In the meantime, Merck has been paying a healthy dividend, currently yielding about 2.6%. Its P/E is higher than average but is destined to be lower than average as it continues to generate higher top- and bottom-line growth.
Merck has been advancing its research and making deals left and right:
- Merck sees success with diet pill based on marijuana study
- Merck Makes Deal to Develop Schizophrenia Drug
- Merck Selects Liaison Technologies for Global B2B Integration
Merck & Co. has demonstrated superior management, research and development decade after decade. Long-term investors have seen a tremendous increase in shareholder equity over that time. The following chart is from the most recent six-month period comparing Merck with the Dow Jones Industrial Average, which is composed of 30 large-cap stocks, including Merck.
Interestingly, over the last three months, the paths are almost a mirror image, exemplifying my point. I do not have any idea if this will continue, seems unlikely. However, there are plenty of good reasons to check out Merck for yourself, and at least put it on your watchlist.
To find potential opportunities and verify my track record, read Chasing Value and Serious Money.
DISCLOSURE: I own shares of MRK.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.
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