In Focus

Unscrambling Pfizer

Putting Pfizer through the Chicks' Dozen
by Lorene

1. Buy What You Know

Their ads are everywhere, even where you least expect them. We were on a plane where my ten-year old and I were reading 'People Magazine' and BAM, there it was in a larger than life ad. I found myself having to explain what "erectile dysfunction" was to a fifth grader! What ever happened to the "let the dance begin"? Anyway, let's just say that we have all heard of Viagra!

2. K.I.S.S.

Ok, you got me on this one after the airplane story! But it is possible to explain one of the drugs they make to a 5^th grader, you just may choose not to! In general it is simple to understand; they make drugs that make sick people well.

3. Industry

Pfizer's industry is Major Drugs, their Sector is Healthcare. Obviously there will always be a need for this type of company.

4. Leader in it's Field

Pfizer is considered the number two drug maker in the world. Add to that their recent merger with Warner-Lambert (WLA) and they're prevailing on the consumer side as well as the prescription drug side. Along with their well-known products such as Viagra and Nuerontin, they've broadened their recognition with products such as Listerine and Visine.

5. Return/Repeat Profitability

Unfortunately, this goes back to there being people in this world that are sick. And like its industry, there will always be a need for these products.

6. Gross Margins

(Sales-Cost of Goods Sold)/Sales

(7205-1194)/7205 = 6011/7205 = .83 = 83%

This far exceeds our 50% benchmark!

7. Net Margins

Net Income/Sales

1361/7205 = .18 = 18%

WAY over our 8% requirements!

8. Lots of Cash

Cash/Long Term Debt

5883/1257 = 4.7

Exceptional!! We prefer 1.5X so this is great!! Keeps us Chicks chirping!!

9. Flow Ratio

(Current Assets-Cash and Cash Equivalents)/Current Liabilities

(17168-1342)/12344 = 15827/12334 = 1.28

Looking good!

10. Growth and Potential for Growth to be Increasing

(7205-6746)/6746 = 6.8

11. Strong Management and Operating History

Chairman and CEO William C. Steele, Jr. has served on the Board of Directors for Pfizer since 1987, but his history with the company goes way back. He started out as a Medical Services Representative, dallied in the marketing and management side of things, and eventually was named President in February 1991. A couple of months later he was named President and CEO and ultimately Chairman of the Board and CEO in March of 1992. Steele received his B.S. in Biology in 1959. This stellar background has aided in catapulting Pfizer into the huge success story that it is, and soon Mr. Steele will step down. Don't worry though, it's simply because he feels he's achieved his goals with Pfizer and would like to retire. He wrote an open letter explaining his decision.

His successor, Dr. Henry McKinnell has been with the company since 1971. Canadian-born McKinnell received his Bachelors in Business from the University of British Columbia, and has worked his way up through the ranks in Pfizer's Tokyo offices. He has been a major factor in Pfizer's latest acquisition (WLA) and seems the most qualified candidate for the position. Steele is very proud of Pfizer, and certainly wouldn't recommend anyone who wasn't an absolute!

12. Buy on Sale

(52 week high+52 week low)/2

(49.25+30)/2 = 79.25/2 = 39.63

Today PFE closed at 42.31

Considering all the movement, growth, and potential for more growth, this seems like a pretty good buy! Even in this dismal market PFE remains strong and very, very Chicky.