I’ve been dabbling a little in the stock market at ShareBuilder, more as a learning opportunity than anything. (Most of my money is in index funds and the like.)
I currently have about 21 shares of Pfizer, presently worth $611.77. News hit today that one of their major drugs in development is being withdrawn, and they’re estimating that the price will drop anywhere from 5-25% when the market opens tomorrow. I can place a real-time market, limit, or stop-loss order for $15.
I still think it’s a decent long-term stock, so I could hold on to it. Then again, it seems silly to hold on to a stock when they’re forecasting such a drop. I also know that its opening price on Monday won’t be the same as its closing price on Friday, so if it drops I’m going at least partially down with it.
So just to further my education, is it worth it to try to unload a stock in a situation like this? My inclination is to hold on and ride it out, but this is a new thing for me.
I agree that you should ride out this news. This is only one product from Pfizer, and shouldn’t make or break the company. Selling on bad news (and buying on good news) is the opposite of the buy low/sell high strategy you should employ.
I’m not so sure anymore. They seem to have had a lot of their future hopes riding on this drug, especially with some of their biggest cash cows losing patent protection in the near future.
I held on today, and the damage wasn’t that horrible–about 11%. I think I’ll hold what I have and buy something else in next months’ buy. Maybe I’ll double up on Proctor and Gamble–it’s always a good idea to bet with Satan. (Kidding! Kidding!)
I’m in the “Buy” camp, assuming that you’re young and have a good reason to believe in the stock for the long haul. I don’t know what you can afford, but if the stock really drops 25% tomorrow, you can grab 4 shares for the price of 3 – but only if you truly believe that the value is $30. If you only buy when everyone loves the company, and only sell when the price goes down, you will always lose money.
Remember that the market has (mostly) done its homework, and part of Pfizer’s price was based on the expected income from that drug. If you think Pfizer will be back up to $30 reasonably fast, jump on board. But remember that interest rates are up (making CDs and bonds competitive with stinker stocks) and the Democrats in the House and Senate may be planning legislation that could sting Pfizer just as it gets back on its feet from this.
Just so you know where my advice is coming from, I bought AMD at $20 and $33. It’s sitting at $21, and I’m prepared to wait until at least 2008 for it to hit the $30s again – but that’s because I know that they’re releasing 65nm parts, and their chips are going to compete with Intel in the server and high-end desktop market. Also, their deal with Dell… well, I believe I know when they’ll hit $30 again because I’ve done my homework. Do your homework, figure out a target price, and then jump in, hold on, or get out.
DoctorJ, I respect you tremendously as a poster and I have every reason to believe that you’re a top-notch physician, but I oh so humbly suggest that you simply not invest in health care companies.
In my view, it’s impossible for investing in a drug company not to change your clinical judgement to some degree.
Take this advice from the son of a financial advisor that had plenty of physican clients. No mater how pure anyones intentions are from the start, eventually they all became emotionally attached to certain drug or insurance companies. What’s worse, it was this horrible feedback loop that hurt both their investing and their clinical judgment.
Let’s take Pfizer’s latest failed Phase-III candidate as an example. If you chose to buy Pfizer in the first place because you say to yourself, “a drug that inhibits the enzyme that is involved in attaching HDL to APOB and raises HDL levels? Brilliant!” Because everyone wants to think they’re smart, especially in their field of expertise, doctors tend to latch onto potential drugs that they think are a good idea. More so than a more rational actor at some mutual fund company would. So, doctors seemed to be more willing to overpay for stocks due to the putative value of some drug still in the pipeline. Once that drug failed Phase-III trials (like torcetrapib and half of all drugs that enter those trials do) they still had an attachment to that drug and this is where it started to interfere with their clinical judgment. They would push off-label uses where the science was lacking, etc.
Basically, when you invest in stocks instead of a mutual fund or something, often people invest way more than just money. It turns into a referendum on how smart or knowledgeable people are and it turns very normally very rational people into some surprisingly emotional people.
For you, the amount ($650) may be small, but the effects could prove larger than you’re expecting.
My husband, the stock broker, warned me of the news and told me to expect a hit on my next statement. I switched to Pfizer after I made a nice profit on Merck, which I had scooped up after the stock fell significantly following one of the Vioxx verdicts.
If I had money sitting in cash, I’d buy Pfizer now. But I don’t, so I’ll hold onto it until things settle down. One of the golden rules of investing is that you don’t sell into fear.