Pfizer Inc. (PFE), Merck & Co., Inc. (MRK): Buying the Pharma Dips

Merck & Co., Inc. (NYSE:MRK) also has a global restructuring program with plans to reduce the number of manufacturing sites, including animal health sites. The company expects to achieve annual savings of $3.5 billion to $4 billion by the end of 2013 and annual savings of about $4 billion to $4.6 billion once the restructuring program is completed.

Another big initiative is the drug maker’s focus on emerging markets. Emerging market sales accounted for 20% of total pharma sales in the fourth quarter of 2012, with China being a key contributor. Merck is collaborating with Sinopharm for the establishment of a joint venture that will commercialize pediatric and adult vaccines in China. Merck already has a JV with Simcere Pharma to ensure greater reach in the cardiovascular market in China.

Pfizer Inc. (NYSE:PFE) had some robust hedge fund interest going into 2013, with 77 hedge funds long the stock. This includes its top hedge fund owner (by market value) billionaire Ken Fisher of Fisher Asset Management with a $797 million position, making up 2.2% of its 13F portfolio (check out Fisher’s cheap stocks).

Meanwhile, Merck is one of billionaire Stanley Druckenmiller’s favorite dividend picks. At the end of 2012, Druckenmiller owned some 2.4 million shares, which was a 22% increase from the shares his fund owned in the prior quarter (check out the rest of Druckenmiller’s dividends).

As for Bristol, Billionaire Jim Simons is the drug maker’s top hedge fund owner by shares, with over 13 million shares owned going into 2013. Bristol is Simons’ top stock holding in his 13F portfolio, while other drug maker Eli Lilly is third (check out all of Simons’ stocks).

Although both Pfizer Inc. (NYSE:PFE) and Merck appear to be cheap, I think Merck & Co., Inc. (NYSE:MRK) is the better long-term investment, with a solid 11% return on equity, and the best dividend yield at 3.7%, compared to Pfizer’s 3.2% and Bristol’s 3.5%. Merck has made positive strides when it comes to restricting and should continue to perform well on the back of a focus toward emerging markets.