First Vioxx, then Celebrex; red flag after red flag in the pharmaceutical industry. Almost three months after Merck (MRK) pulled Vioxx off the shelf, its stock lost almost 30%. And since Pfizer (PFE) brought the news that Celebrex might bring the same cardiovascular risk last Friday, Pfizer stock retreated 20%.
I must admit I didn't do very well this year in my investments: I haven't traded for almost seven months, and my portfolio is draggng my net worth growth from time to time. Especially, my option plays against the market did not pay off as planned.
On the other hand, I have many good memory investing in depressed stocks. My past success stories included Sears (S), Cigna (CI), R.J. Reynolds (RJR) and Altria (MO). For Pfizer, I believe it is a reputable company that will ultimately recover from this disaster. As a value seeker, I love the 12x forward P/E and 3.1% dividend yield.
Nevertheless, I am mindful of the risks: it can surely become a falling knife: as Pfizer decided not to withdraw Celebrex from the market, which might increase its legal exposure in the future. But I tend to believe the professional judgment by the people at the helm. Other risks include Bextra being dragged into the same rathole and the outstanding Liptor patent challenge.
I haven't made a decision yet, but I am keeping Pfizer in my watch list now.