My justification of our biggest blunder to date:

So, the second time we were choosing an individual company it was supposed to be a higher risk area, so we went with pharmaceutical companies. In retrospect this was probably a pretty good sector to tackle early, not on a chemical level, but in terms of business model these are easy companies to understand. They raise capital, do research, and then if a product works they make a ton of money from it funding dividends, and additional research.

 

The big companies we considered like Pfizer, and Eli Lilly have numerous patents on drugs that are making them a ton of money, but that in cycles will expire and the performance of the stock will be based on how good a job they do of replacing those products with new ones. Smaller companies in this vain are working on a single product, and if it works who knows what they will do (like Mannkind).

 

In the end we decided to split our investment between MGI Pharma (which I will write about later), and Pfizer. Pfizer was meant as a hedge against the riskier investment, due to its age, size, and historic significance. As of now Pfizer is our worst investment, and the only thing I can really say in its favor is that it was a smaller one. It has paid a nice dividend, and seems set to continue to, but its shares have suffered.

 

A product lineup which included Lipitor, Diflucan, Zithromax, Viagra, and Celebrex were big influences on our decision, in addition to some quick interviews I did with some friends of mine in the medical profession (who prescribe these drugs more than other companies’ drugs). It may still work out for us though, any of their current projects of which they always have many could turn into the next Viagra, or Lipitor. If it does you’ll start to see that per share price rise in addition to the generous dividend, however if their research hits snags, or the drugs they produce don’t catch on, we could eventually see the dividend dropped, while the stock price continues to fall.