Pharmaceutical Drug Pricing: List Prices vs. Net Prices

You probably saw the news earlier this year that pharmaceutical companies raised the prices of over 250 drugs. As someone with a website that offers the investor’s perspective on all of this, I get to wondering: If you see the news items that a drug company is raising the prices of prescription drugs in its portfolio by an average rate of 8-10%, and the typical unit sales growth for a drug company is 8%, shouldn’t these companies be delivering close to 20% annual returns to shareholders each year?

Historically, drug makers outperform the S&P 500 by a percentage point or two each year, which is a difference that becomes significant over time, but the degree of investment performance does not seem to match the degree to which the list prices for prescription drugs increases every year.

The answer is that there is a huge difference between “list prices” for pharmaceutical … Read the rest of this article!

What If You Only Make One Good Investment Your Entire Life?

Tonight, I’d like to introduce to you a figment of my imagination for the purposes of this article only, Luckless Larry. Larry is a no-talented investor who spent the 1980s investing $5,000 on January 1st of each year.

On January 1st, 1980, he bought $5,000 worth of Lehman Brothers stock.

On January 1st, 1981, he bought $5,000 worth of Washington Mutual stock.

On January 1st, 1982, he bought $5,000 worth of Worldcom stock.

On January 1st, 1983, he bought $5,000 worth of Johnson & Johnson stock.

On January 1st, 1984, he bought $5,000 worth of General Motors stock.

On January 1st, 1985, he bought $5,000 worth of Enron stock.

On January 1st, 1986, he bought $5,000 worth of Conseco stock.

On January 1st, 1987, he bought $5,000 worth of Chrysler stock.

On January … Read the rest of this article!

Monthly Dividend Stocks Are Manipulating You

Income investors, recognizing how much the joy of a stable cash flow can improve their lives, often press their luck in trying to find the point at which point you can have too much of a good thing.

There are two areas where the abandonment of common sense can get an income investor into trouble: (1) one, if he ignores warning signs about a potential investment’s current profitability and outlook in search of dividend yields that are above 5%, or (2) he is drawn to the idea that he can better regulate his lifestyle and investing desires by loading up on stocks that make a monthly deposit into one’s bank account each month.

The problem with investing in stocks that pay dividends monthly is that, more often than not, the lure of dividends is being used as an enticement to prop up the share price of a stock that would Read the rest of this article!