Be sure to check out our detailed stock analysis (click here). Billionaire Ken Fisher had a concentration of his portfolio (at the end of 2010) in dividend-paying stocks. We have outlined five of his large-cap, highest-yielding picks below.
Fisher founded the multi-billion dollar investment firm Fisher Asset Management in 1979 and utilizes a strategy focused on identifying "information not widely known" or interpreting "widely known information differently and correctly from other market participants."
Fisher is also the of Forbes' Portfolio Strategy, and has been writing the column for over 25 years, making it one of Forbes' longest running columns. In 2010, Forbes started publishing an accounting of Fishers' stock picks made by him over the previous 14 years. According to Forbes, Fisher's picks have managed to beat the S&P 500 overall on average, lagging the index in only three of the 14 years (check out Fisher's cheap stock picks).
Fisher's top pharma picks
A number of Fisher's stocks are in the pharma industry, including four mentioned below and starting with Pfizer (NYSE:PFE), which pays a 3.4% dividend yield and is Fisher's second-largest holding. Johnson & Johnson (NYSE:JNJ), another major pharma company, pays a 3% dividend yield and is the fourth-largest holding for Fisher. Jim Simons also loves pharma dividends (check out his five dividend payers).
Pfizer focuses on the development and commercialization of a wide range of products, including human and animal biologic and small molecule medicines and vaccines, as well as consumer healthcare products. Pfizer beat fourth-quarter earnings estimates and gave 2013 guidance in line with expectations, where interim growth will be driven by cost-cutting efforts and longer-term growth by the success of drug development.
The company will most notably be looking to hedge the loss of exclusivity on Lipitor and the upcoming loss of exclusivity on additional products in the next few years. Pfizer is focusing on treatments in the high-growth areas of oncology and cardiology, while lowering funding for the higher-risk, lower-productivity therapeutic areas such as allergy, respiratory diseases and internal medicine.
Johnson & Johnson is heavily exposed to its top drug Remicade. The drug contributed about 24% to pharmaceutical product revenues, with sales for the drug up 12% year over year in 2012. Remicade is approved for several indications including Crohn's disease, ankylosing spondylitis, psoriasis, psoriatic arthritis, ulcerative colitis and rheumatoid arthritis.
However, the company is looking to new products to help add diversification and drive future growth. New products showing promise include Prezista, Intelence, Velcade and Invega, with growth of 17%, 11%, 17% and 10%, respectively, year over year in 2012. The company is also a giant among the other pharma companies listed, with a $220 billion market cap; what's more is that the stock has a low 0.5 beta (see how hedge funds are trading Johnson & Johnson).
Fisher's love for pharma continues
Yet another pharma stock, GlaxoSmithKline (NYSE:GSK), pays a 5% dividend yield and is Fisher's 29th largest holding. This major pharma company operates across Europe and the U.S. and is making various entries into the emerging markets to drive growth.
GlaxoSmithKline is looking to hedge the loss of revenues from generic competition on key drugs by making key acquisitions. The drug company acquired such companies as Cellzome and Human Genome Sciences last year. The Human Genome acquisition gave Glaxo full control over lupus drug Benlysta and late-stage/regulatory candidates such as dabrafenib and Eperzan. Benlysta sales increased 45% on a sequential basis in the fourth quarter of 2012.
Sanofi (NYSE:SNY) pays a 3.6% dividend yield and is Fisher's 11th largest holding. This company also happens to be another pharma related company, developing and manufacturing pharmaceutical products.
The key for Sanofi, much like Glaxo, is emerging market expansion. The company saw sales from emerging markets up 8% year over year in 2012 and emerging markets accounted for 32% of total sales. The emerging market area is expected to account for 38% to 40% of total sales by 2015.
Betting on the economy
Fisher's most noticeable, non-pharma bet, is on General Electric (NYSE:GE). The economic bellwether is Fisher's eighth-largest holding and pays a dividend yield of 3.2%. GE is an industrial conglomerate, selling products that include jet engines, gas turbines, appliances, medical equipment and more (check out other bellwether champs).
GE should perform well over the interim given its long-cycle energy and technology businesses. As well, improving credit markets should be a big positive for the company, where GE Capital made up some 30% of total revenues last year. GE recently sold off its 49% stake in NBCUniversal to Comcast for $18 billion. GE has now upped its stock repurchase plan to $35 billion, with $10 billion to be bought up in 2013. The sell-off of NBCUniversal should free up cash and resources for the company to focus not only on share repurchases, but also its core industrial businesses (read more about GE's buyback plans).
Fisher's five dividend-paying stocks have a high weighting toward the cash flow generating pharma industry, which should perform well over the interim given the rising population and aging out of the "baby boomer" generation. As well, GE is a solid bet on the expected rebound in the global economy.