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Warren Buffett Buys Bristol-Myers Squibb, And So Should You


  • Bristol-Myers Squibb is a leading biotech company that continues to generate strong results despite the pandemic.
  • Shares are quite inexpensive and offer an above-average dividend yield.
  • Buffett seems to like the stock a lot, and there are good reasons for other investors to do so, too.
  • This idea was discussed in more depth with members of my private investing community, Cash Flow Kingdom. Get started today »

Article Thesis

Big pharma and biotech are sectors that are still inexpensive in the current market, where a lot of other stocks are expensive. One of the best biotech companies you can buy right now is Bristol-Myers Squibb (NYSE:BMY). The company provides a solid dividend yield, has a compelling growth outlook, and shares trade at a very inexpensive valuation. The fact that Buffett's Berkshire Hathaway (BRK.A) (BRK.B) has recently added to its existing position further underlines the fact that this is an attractive opportunity right now.

An Unloved Industry

2020 has been a strong year for stocks overall, despite the sell-off that occurred in spring. For the whole year, major indices were still up quite a lot, and the start to 2021 has given investors more of the same.

This has, however, also led to stretched valuations for many stocks, as well as for the market overall. There are, however, some pockets of the market that are still inexpensive. This includes some REITs, energy stocks including midstream, and pharma & biotech.

The last group is, in general, interesting for investors, as it combines several positive factors. First, pharma and biotech profit from a trend of growing healthcare spending in many countries. Healthcare expenditures as a percentage of GDP have been growing in the US, in China, and so on. This means that healthcare spending, overall, must be growing at a faster rate than the economy overall, which is great for the companies that operate in this industry.

Healthcare spending also is not cyclical or vulnerable to economic downturns, as patients still require medical care even during a recession. This makes pharma and biotech companies resilient versus recessions, which results in below-average volatility and solid dividend growth streaks in many cases. The fact that many of the major pharma and biotech companies are still trading

Is This an Income Stream Which Induces Fear?

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This article was written by

Jonathan Weber profile picture

Jonathan Weber holds an engineering degree and has been active in the stock market and as a freelance analyst for many years. He has been sharing his research on Seeking Alpha since 2014. Jonathan’s primary focus is on value and income stocks but he covers growth occasionally.

He is a contributing author for the investing group Learn more.

Analyst’s Disclosure: I am/we are long BMY, ABBV, BRK.B. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (50)

Rex Rode profile picture
This just in....The IRS is suing BMS for up to 1.4 billion dollars for their attempt to evade taxes with an offshore patent scheme. This is just another example of how dirty BMS truly is! This on the heels of their underhanded dealings on the CVR deal. Looks like 2021 is going to have some extra costs on the balance sheet! endpts.com/...
Been adding to mrk, abbv, bmy, gild, pfe and amgn for income and appreciation potential. Thanks for the insightful article.
Jonathan Weber profile picture
Glad you enjoyed it! I like these stocks as well, we are working on a MRK article right now!
GrayhawkAZ profile picture
@Jonathan Weber It is interesting the lack of performance over the last 5 years... Great run in market and this one is down -5-6% in capital losses over that period.. Figure better days are ahead as they digested Celgene
Big AL77 profile picture
I've been adding to BMY for the last 6 months and is now in my top five holdings along with T, MO, BABA and UNM. Thanks for the article!
Jonathan Weber profile picture
@Big AL77
Glad you liked it! I like your other picks as well
Mooseleader profile picture
How do you think BMY compares to ABBV?
Scott Eranger profile picture
@Mooseleader I like Abbv better. Big pharma...has lagged.

Sooner than later it moves, no?
What is your view on Pfizer?
Jonathan Weber profile picture
@Fred Ziffel
Think it is solid, although some management mistakes in the past
Fully agree!
most undervalues stock i know is voyager digital VYGVF however im also allocating much of my cash to healthcare now bmy and pfe look like solid choices to me thanks for the article
Jonathan Weber profile picture
Thanks for sharing! What do you like about the company the most?
Mountain Marmot profile picture
Disc; long BRK.B, GILD
Jonathan Weber profile picture
@Mountain Marmot
Thanks for sharing! I have held GILD for a while as well, sold during last spring when shares jumped, but could be attractive again
Ray Merola profile picture
At a recent investor conference, management offers remarks about forward capital allocation. 3-year expectations: $45 to $50 billion FCF, $14 billion dividends, $15 billion deleveraging, $12 stock billion repurchase. Balance pointed towards growth M&A. Quite reasonable.
@Ray Merola Agreed. All the numbers/valuation/metrics look reasonable, and management appears to be acting prudently. Just need to wait for the market to catch on.... actually.... never mind.... I'd rather a couple years of dripping before the market catches up!
Jonathan Weber profile picture
@Ray Merola
Thanks! Sounds like a good approach indeed, I like it.
EverydayJoeSchmo profile picture
Glad i bought brk b on monday. I am up when everything is down today 😜
Owning BMY is like watching paint dry.
But, that's OK. I'll take the 3%.
Jonathan Weber profile picture
It's not very exciting, true, but I believe it will be rewarding!
P373R profile picture
@SCOTCHYSCOTCHSCOTCH here's something to mix it up for when watching paint dry will inevitably become too boring to bear ;)
I’m long BMY, have been since the spring sell off, but not sure Buffett would entice me to buy more. I’m up $10 since the March 2020 sell off, where I bought in, but the stock has been flat since, that’s one year of going nowhere, but it does pay a 3% dividend, so I’m hanging on to it for now.
A very reliable company BMY, has been around for a long time. Solid stock with a decent yield.
Jonathan Weber profile picture
@Money 29
Fully agreed, glad you like it!
After BMY took over Celgene with their life saving Oncology drug pipeline, I realized this stock's pipeline just expanded for future growth and bought in. This
Steady Eddy stock with a decent dividend will be a long term hold in my portfolio.
Jonathan Weber profile picture
@Up and Away
Thanks for sharing, and glad you agree!
Rex Rode profile picture
I can hardly wait for Ide-cel to be approved!
Jonathan Weber profile picture
@Rex Rode
That could be a catalyst, agreed.
richjoy403 profile picture
As I'm quite overallocated to the Healthcare Sector, and underallocated in a few others, BMY (and a couple others) are on the block. I'm trimming to exit as limit sell orders are filled. I'm also backfillng with XLV, a solid performer.

Jonathan Weber profile picture
Thanks for sharing. I think healthcare is attractive right now, so don't think overallocation must per se be bad.
richjoy403 profile picture
@Jonathan Weber -- I'll still be quite overallocated (and I also need to trim my position total).
wiuser profile picture
BMY is a combination of growth and value that the market has not appreciated. This stock will do well even in a market correction. Long BMY and Jan. 2022 options.
Jonathan Weber profile picture
Yes, great summary of the two positives here!
Funny ,it's been touted by analysts I respect for the last 3 years.To double from when it was in the low 50s,just has not taken off. I've been in and out of it for 3 years.Reminds me of another stock I had NVS,that was heavily touted to me by a respected broker,never took off,couldn't get past 60.After selling it ,I looked about 5 years later and it was in the low 100s.Would gladly take half of that result with BMY.
@Jon Cooper
And that’s why I don’t listen to brokers or any talking heads. I study and make my own choices. Done pretty good too! Good luck!
BTW I bought BMY @ $44.6 and sold @$65. Eight months later. Actually got lucky. Didn’t believe all the negative BS about the merger.
BMY is so undervalued. I worry that I've missed a major red flag here, but search as I might, I can't find anything terrible! Oh well, just need to be patient and wait for the market to catch on.
Jonathan Weber profile picture
Ha, it indeed is very inexpensive!
@Crimper I would be more worried if the rest of the bio space were taking off, but many of the names are very undervalued( Abbie and Merck for instance) I have been adding to bmy for a while now. I will add more if it dips below 60 again
@Crimper I think the red flag would be the democrats in power. Progressives might push for price control in health care, or a major overhaul in how much big pharma can charge for their drugs.
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