Investing is all about looking to the future, investing not in what was successful in the past, but what will be successful in years to come.
That’s why I’ve repeatedly advocated the merits of buying into companies in the biotechnology and technology sectors. But if you could invest in just one firm, which would it be: a pharmaceuticals giant with expertise in a range of biological drugs, or a tech business that’s perhaps the leading consumer stock in the world?
AstraZeneca(LSE:AZN) is one of Britain’s leading pharmaceuticals companies. And it’s now basically a biotech business.
A few years ago there was much talk about the patent cliff, as a series of patents on blockbuster drugs expired, leading to a sharp fall in AZ’s earnings. But this wasn’t the end of the pharmaceuticals industry – far from it. As many chemical drugs have faced generic competition, so a whole new generation of antibody-based treatments used to treat ailments such as cancer and arthritis has emerged. And several of these are real money-spinners.
Cancer used to be an incurable disease, but that’s no longer the case. And that’s down to a succession of advances in the medical and bio-sciences. And our understanding of the complexities of proteins has been at the core of this.
What’s more, the global demand for medicines is growing, as emerging market healthcare spend climbs. That’s why I’m a strong advocate of the investing merits of AstraZeneca. However, the share price has already risen a lot, and a P/E ratio of 28, with a dividend yield of 3.62% is on the pricey side.
There’s no doubt about it, the rise of Apple(NASDAQ:AAPL) from a tech no-hoper to the world’s biggest company has been the investing story of the past 15 years. But is that story now over?
There are differing views on this. Billionaire investor Carl Icahn recently sold his holding. Yet equities guru Warren Buffett bought in. Who’s right?
Well, I have to admit, Apple’s recent results have disappointed. Sales have fallen around the world and, most worryingly, they’ve slumped in China, the market that chief executive Tim Cook placed so much emphasis on.
But, let’s get a little perspective on this. I’m a firm believer in the power of the trend. The ranks of the middle classes in emerging markets are growing at an astonishing pace. This will lead to a massive global consumer boom. And the iPhone remains the leading object of desire in the world.
Even if sales in China have fallen, we’ll see growth in countries such as India and Malaysia. In much the same way as there was no demise of the pharmaceuticals industry after the patent cliff, this isn’t the end of Apple’s boom. But, perhaps, we’ll see this company turn from being a high-growth punt to being a high-yielding blue chip to add your portfolio. And a P/E ratio of just 11, with a dividend yield of 2%, still looks good value.
Both companies are worthy investments but, in my view, and because of its cheaper rating, Apple just edges it.