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This column was originally published on RealMoney on Aug. 25 at 12:08 p.m. EDT. It's being republished as a bonus for readers.

The $253 million judgment against


(MRK) - Get Merck & Co., Inc. Report

probably has sent Big Pharma executives running for aspirin, if not Prozac.

The judgment was due to Vioxx -- a so-called Cox-2 inhibitor for pain relief, widely used by arthritis sufferers -- and its link to a heart arrhythmia in a user that led to his death. New York-based


(PFE) - Get Pfizer Inc. Report

, the world's largest drug maker, could also face legal problems, since its competing drug, Bextra, was withdrawn from the market in April, and another similar drug, Celebrex, though still on the market, now comes with warnings about potential heart problems.

Yet, Pfizer's stock has held up pretty well, trading between $25 and $26, and according to two guru strategies I follow, this is a good time to add it to your portfolio. You're clearly taking a chance when investing in Pfizer -- legal exposure, public complaints about Big Pharma profits, potential government regulations -- but if you have some contrarian tendencies, this might be the time to swallow the pill and buy.

The James P. O'Shaughnessy Strategy

James P. O'Shaughnessy's Cornerstone Value Strategy looks for large, well-known companies with a market cap greater than $1 billion, because these companies tend to exhibit solid and stable earnings. Pfizer's market cap of $188.3 billion easily passes this test.

The strategy's second criterion is strong cash flows, defined as cash flow per share that is greater than the mean of the market's cash flow per share, which is $1.59. Pfizer's cash flow per share is $2.20.

Companies whose total number of outstanding shares exceeds the market average are also valued, because these are the better-known and more highly traded companies. The market's average number of shares is 627 million shares, while Pfizer has 7.4 billion.

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Another test is a company's trailing 12-month sales. They must be at least 1.5 times greater than the mean of the market's trailing 12-month sales. Pfizer easily surpasses this, with its sales of $53.3 billion vs. the market's $16.2 billion.

The final step in the Cornerstone Value strategy is to select 50 companies from the market-leaders group (comprised of those that have passed the previous four criteria) that have the highest dividend yield. Pfizer, with a dividend yield of 2.98%, is one of the 50 companies that satisfy this last criterion.

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The Peter Lynch Strategy

The strategy I've worked out based on the writings of Peter Lynch also favors Pfizer. By this strategy's standards, the company is a "true stalwart," which means its growth rate (16.4%) falls between 10% and 19%.

True stalwart securities can be expected to gain 30%-50% in value over a two-year period, if they can be purchased at an attractive price based on the P/E-to-growth (P/E/G) ratio. The Lynch strategy is known for its P/E/G ratio, which compares growth to the P/E ratio. This should be 1.0 or less, and Pfizer lands right at 1.0.

One factor this strategy takes a close look at is inventory levels, because when inventories increase faster than sales, there may be trouble ahead with excess inventories. For Pfizer, its inventory-to-sales ratio was 12.74% last year, while for this year it is 12.68%. Since inventory-to-sales has not changed appreciably, Pfizer passes this test.

The EPS for a stalwart company must be positive, which is true for Pfizer (it earned $1.33 per share).

Finally, this strategy looks at the debt/equity ratio, and is content if equity is between three and 10 times debt. At five times debt, Pfizer fits the bill.

Big pharmaceutical companies like Pfizer are under fire from various sources, but they generally remain very profitable and their products are, of course, in great demand. Pfizer is the biggest of the Big Pharma companies, and has long been a stellar performer. Being in a somewhat out-of-favor industry now may portend good price appreciation and fewer headaches in the future, making Pfizer stock a pill you one day may be glad you swallowed.

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At the time of publication, Reese was long Pfizer, although holdings can change at any time.

John P. Reese is founder and CEO of, an Internet investment research and stock analysis firm selected as one of Forbes Best 100 sites on the Web. He is also co-author of

The Market Gurus: Stock Investing Strategies You Can Use From Wall Street's Best

. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Reese appreciates your feedback.

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