When it comes to investing their hard earned money, people are understandably hesitant because of the way the market has been in the last few years. With real estate and bank collapses all over the world it is no surprise that people have lost their confidence and faith to invest.
However, there is no doubt that pharmaceutical companies are a great and safe place to start investing.Many investors have stopped investing in pharmaceutical companies lately because of the shortage of drug pipelines, patent expirations, huge generic competition, failure in research, drug scandals and concerns about drug safety. These reasons have literally taken its toll on the large pharmaceutical corporations. Therefore they have undergone transformations to recapture the market and change the way they go about doing business.
Some of these ways are - ridding themselves of the "fat" they accumulated over the past years, developing new effective systems, sales tools and technologies to fight off competition etc. Companies are also concentrating on "small patient" needs instead of developing huge "Blockbuster" drugs. They are also entering new markets in Asia where there are huge opportunities for growth and development. The companies are also taking part in co-promotes, JVs and acquisitions to give their pipelines the much needed boost. Outsourcing of activities like clinical research, sales and R&D to third parties is being done.
Pharmaceutical companies are attractive because of their high-paying dividends. Great benefits can be reaped by investing in these companies. After all, this is a business that has small costs and huge sales! Most countries in the world today are experiencing what they say is an "aging population"! This segment of people helps the pharmaceutical industry and has a positive influence on the future performances of these companies.
Another known fact is that medical equipment companies do well when the economy is booming as well as when it is slowing down. Thus they offer investors advantages that other companies do not. Investors who are smart find investing in medical products companies a smart move. Companies that have enough of cash on hand to do research and development etc, have a good chance of growth sustainment. They also have very little debt. Remember innovation is very important for the future growth of the company which in turn benefits the investor.
Investors today use the P/E ratio (price to earnings ratio) to assess the viability of a company. It is very promising if you can invest in a company with a growth rate that is accelerating. Check the PEG ratio (which makes a comparison of the P/E ratio with the company's annual earning growth rate).
Value investors generally are on the look out for businesses that have good fundamentals even though they experience a dip in their share prices as they may offer good value. A lull in between cycles of production or some bad news that is temporary could be the reason for the share price drop that has led to the company offering a good value.