Ken Griffin would be a lock for a hedge fund management hall of fame. Citadel became one of the most successful hedge funds under his leadership. Griffin became one of the world's wealthiest with approximately $37 billion. As expected, investors closely monitor Griffin's stock trades. Do these investors earn income? Good reason suggests they should. The billionaire bought one high-yield dividend stock.
Pfizer 4x Griffin's Citadel hedge fund holds equities for short periods, so he's not a buy-and-hold investor. However, Pfizer (NYSE: PFE) is an exception. Citadel invested in Pfizer in Q2 2013. Its portfolio has incorporated pharma stock since then, with many big rises and declines in share ownership.
One of such significant swings happened in Q4 2023. Griffin bought 9.34 million Pfizer shares, quadrupling Citadel's holding. At Q4, the hedge fund owned $334.8 million in the company. Citadel bought a lot of Pfizer stock before this significant gain. Griffin purchased pharmaceutical shares in the first three quarters of 2023.
Why does Griffin like Pfizer? Griffin hasn't addressed Citadel's aggressive Pfizer acquisition. However, we can reasonably predict why he likes the stock. Pfizer's valuation is attractive. The stock is trading at less than 12.2x anticipated earnings after falling 35% in 12 months and 55% since early 2022. Meanwhile, the S&P 500's projected earnings multiple is roughly 20.9.
Pfizer's 6.3% dividend yield is another perk of its severe share price decrease. Nearly a decade-high yield. Griffin knows Pfizer's share price doesn't need to rise much to provide market-beating total returns given its high dividend yield.
Griffin also understands that investing is like chess: You must plan ahead. Pfizer looks bad. Sales of its COVID-19 medications are falling, and numerous blockbuster drugs' patents expire in the coming years. However, Pfizer's prospects should increase significantly.
New product and indication launches started by mid-2024 are expected to generate $20 billion in yearly revenue by 2030 for the giant pharma corporation. More than balances the predicted negative impact of patent expirations. By 2030, Pfizer expects business-development transactions to generate $25 billion more revenue.
Who should invest in Pfizer except billionaire hedge fund managers? Maybe "yes"—at least for some. Pfizer may not appeal to growth investors. Even with fresh product releases and business development collaborations, the drugmaker's growth prospects aren't as good as many other equities. However, income and value investors may choose Pfizer. The stock has a great dividend and a modest value. Patient investors should see good total returns from Pfizer.
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