2. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 95
Merck & Co., Inc. (NYSE:MRK) is a New Jersey-based pharmaceutical company that provides innovative health solutions to its consumers. The pharmaceutical industry is currently facing a significant investment challenge. The performance of big pharma stocks over the past two decades has been notably unimpressive. This lackluster performance is primarily attributed to the growing risks inherent in the big pharma business model, which requires substantial investments in ongoing research and development for new drug trials.
What sets Merck & Co., Inc. (NYSE:MRK) apart from its peers is its ongoing success in leveraging acquisitions for continuous benefits over the years. In March this year, the company acquired Harpoon Therapeutics in a deal worth $656 million. This move will strengthen its oncology pipeline directly, and it may also open up opportunities for developing potent new combination therapies in the near future. Since the acquisition, the stock is up by 3% and has gained nearly 12% so far this year. Carillon Tower Advisers highlighted the stock’s strong returns in its Q1 2024 investor letter. Here is what the firm has to say about MRK:
“After posting lackluster returns in 2023, Merck & Co., Inc. (NYSE:MRK) got off to a strong start in January by raising the long-term sales forecasts for its oncology and cardiology pipelines and reporting solid fourth-quarter results, coupled with strong financial guidance for 2024. Merck shares also finished the quarter strong after receiving U.S. Food and Drug Administration approval in late March for a new cardiology medicine with the potential to contribute significantly to sales growth over the next several years.”
In addition to acquisitions, Merck & Co., Inc. (NYSE:MRK) spends a lot on R&D. In the first quarter of 2024, the company’s R&D expenses were $4 billion, down slightly from $4.3 billion in the same period last year. The company’s revenue for the quarter came in at $15.7 billion, up 9% from the prior-year period. The company highlighted in its earnings report that it is leveraging innovation to drive forward its extensive pipeline and is optimizing the effectiveness of its wide-ranging commercial portfolio for the benefit of its patients. The stock is currently trading at a forward P/E multiple of 14.64x, which is lower than the industry’s average of 18.88, indicating potential undervaluation related to its peers.
On May 28, Merck & Co., Inc. (NYSE:MRK) declared a quarterly dividend of $0.77 per share, which was in line with its previous dividend. The company has been rewarding shareholders with 13 consecutive years of dividend hikes. The stock has a dividend yield of 2.44%, as of July 7.
Of the 920 hedge funds tracked by Insider Monkey at the end of Q1 2024, 95 funds owned stakes in Merck & Co., Inc. (NYSE:MRK), compared with 98 in the previous quarter. The consolidated value of these stakes is more than $8 billion.
