President J. Jeffrey Auxier of Auxier Asset Management says his firm is always looking for mispriced companies, and that Biogen Inc (NASDAQ:BIIB) is an example of a high-quality company trading at a bargain price.
One we bought recently, in the last quarter, is a stock that dropped from $480 down to $230, biotech leader Biogen. They’re a major player in multiple sclerosis — MS — drugs and in the Alzheimer’s area.
This is an excellent, well-run biotech with a strong research culture, and they basically stumbled, and their stock price dropped to 12 times earnings, down from a five-year average in excess of 25. Yet, it has a tremendous high free cash flow yield, triple the 10-year bond yield and also the Alzheimer’s drug aducanumab, which seems to have a lead in the $20 billion Alzheimer’s space. The market cap of the company is only around $60 billion.
This relative bargain is due to the negative political ramifications of pricing on health care. Many high-quality health care names have recently sold off hard, and yet, many sport very attractive growing high free cash flow yields. While most investors have been chasing after interest or dividend payouts, we are more interested in growing free cash flow yields that in turn can lead to growing dividends. We look carefully at mandatory capital spending on each company. We like companies that are serious about investment in research in order to address real health problems.
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