This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

3 Profitable Pharmaceutical Stocks To Consider As Congress Debates Drug Bill

Mary-Lynn Cesar, Kapitall: Approval of Congress is at an all-time low, but a bill in the Senate could help pharmaceutical stocks reach highs.

Congressional approval fell to its lowest level in almost 40 years due to lingering bad feelings from last month’s government shutdown.

Read more from Kapitall: Value Investing: John Thompson Says to Ditch Tech, Buy Big Banks

According to a Gallup poll released on Tuesday, the approval rating currently sits at 9%, bringing the year-to-date approval rating to 14%, and increasing the likelihood that 2013 will result in the lowest yearly average Congressional approval rating in Gallup history.

Business as usual

The Gallup poll found that 59% of survey participants cited inaction and partisan gridlock as the leading reason behind their disapproval of Congress. And in the four weeks since Congress returned to work, the discord has reappeared: GOP senators blocked two judicial nominees, and House Speaker John Boehner stated his refusal to conference over the Senate’s immigration bill.

H.R. 3204: Drug Quality and Security Act

But Congress has made slight headway in some regards: the Senate voted 97-1 on Tuesday to advance the Drug Quality and Security Act, a bill that will place compounding pharmacies under more Food and Drug Administration (FDA) oversight. The bill, which has overwhelming bipartisan support, was passed by the House in September and requires Senate approval before President Obama can sign it into law.

Compounding pharmacies mix or change ingredients to create tailored medications for the needs of specific patients. Under the proposed legislation, these pharmacies would be prohibited from copying widely available, FDA-approved drugs in their compounded medications.

Investing ideas

If Congress passes the Drug Quality and Security Act, pharmaceutical companies may see increased sales due to this restriction, which would bar compounding pharmacies from copying their drugs. This inspired us to look for investment opportunities among pharmaceutical stocks for our following screen.

To begin, we constructed a universe of stocks belonging to biotechnology and drug manufacturing industries. We then screened that group for stocks with rising gross profit margins year-over-year for the last three years.

Gross margin is the percentage of profit a company makes for each dollar it generates in sales, after deducting production expenses. Examples of these expenses include operating costs, payroll, and taxes.

Gross Margin = Gross Profit / Revenue

The higher the percentage, the greater the gross profits a company takes from its revenue. When a company has rising gross margins, it indicates that the firm is in control of its costs.

We then narrowed down that list to companies with FDA-approved drugs on the market. This left us with three pharmaceutical stocks on our list.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG

Markets

DOW 18,162.99 +121.45 0.67%
S&P 500 2,123.48 +19.28 0.92%
NASDAQ 5,106.5930 +73.8420 1.47%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs