Popping the Pfizer Pill

Adrienne Carter

I admit it. I like a good bargain, whether it's a new pair of shoes or a blue chip stock. That's why I find Pfizer so appealing these days. After Pfizer announced it was pulling a major pipeline drug from trial, the stock started looking a little peeked. Shares of Pfizer fell from around $28 to less than $25. It's moved up a bit since its low. Certainly, investors' concerns are understandable. Besides this latest news, Pfizer also faces patent challenges with its blockbuster drug, Lipitor.

With all that bad news, though, it sounds like a good contrarian play to me. Indeed, at its current price, Pfizer is trading for roughly 12 times 2007 earnings. In fact, it's at the cheapest level since Hillary Clinton decided to push her health care agenda more than a decade ago, an agenda that decimated the stocks of pharmaceuticals like Pfizer.

Value guys like John Buckingham of Al Frank Asset Management figure that Pfizer should have a P/E closer to 17--which would push the price up to as much as $40. Don't think it could happen? Well, consider Merck, which isn't exactly a golden boy of Wall Street these days. Right now, Merck has a P/E north of 17. It's probably only a matter of time before investors come to their senses about Pfizer.