How to Buy Pfizer Stock: Invest in a Leader in Pharmaceuticals
The COVID-19 pandemic has got many people interested in medical and pharmaceutical companies, especially those that are working on treatments or vaccines for the disease.
While many companies are working together to try to create a vaccine or drug to fight coronavirus for the common good, the reality is:
The companies that produce effective drugs are likely to see significant profits as governments around the world buy those treatments.
Pfizer is one of those leading pharmaceutical companies that are researching and developing drugs, medicines, and vaccines.
And, it is among the companies working on an effective vaccine for COVID-19.
If a trial succeeds, the company may gain significant value.
If you’re interested in buying shares in Pfizer, here’s what you need to know.
Pfizer Company Overview
Pfizer (ticker symbol PFE) is an American multinational pharmaceutical company. It’s one of the largest pharmaceutical companies in the world and ranked at number 57 in the 2018 Forbes 500 list of companies with the greatest revenue.
The company was founded in New York City in 1849 and produces medicine and vaccines for a variety of diseases.
Today, the company is worth almost $200 billion and recently announced that preliminary trials for its Covid-19 vaccine showed that it was roughly 95% effective.
Research and Analysis
Whether you’re considering an investment in a pharmaceutical company or any other type of business, it’s essential that you do some research.
Every investor has a different approach to research.
Some prefer fundamental analysis, which involves looking at a business’s books and stats, such as revenue, earnings per share, expenses, and debts. Fundamental analysts may also research the company’s future prospects based on product development or the competition.
Notable competitors in Pfizer’s industry include:
- Gilead Sciences (GILD)
- Biogen (BIIB)
- BioNTech (BNTX)
- Moderna (MRNA)
Others use technical analysis, trying to identify patterns in a stock chart that they can use to predict future price changes.
Keep in mind:
Even companies that look great on paper and that have positive investor sentiment aren’t guaranteed to gain value.
The company could fail to continue its positive direction, or the market may already have the company’s future growth priced in.
You’re taking a risk whenever you decide to invest but investing in medical and pharmaceutical businesses can be especially risky.
Every company’s success relies on its ability to produce and sell new products and services. Without successful products, companies have nothing to sell and no way to produce revenue to keep the business running.
With medical companies, it can cost millions or billions of dollars to develop and test new drugs or vaccines. Some may run out of money before development finishes or find out that their drug doesn’t work.
Smaller companies with just one or two medicines in development could see their share price tank if a drug fails to produce positive results. In the worst case, a negative trial could make the company fail.
Long development cycles
Another risk of pharmaceutical companies is that drug development can take a long time. Vaccine research for COVID-19 has taken less than a year but that is far from the norm. In some cases, it’s taken a decade or longer to develop successful drugs and vaccines.
During development and testing, these companies won’t have any new products, which could lead to stagnant stock prices.
Successful trials don't guarantee stock price increase
Even if a medical trial succeeds, there’s no guarantee that it will produce an increase in the stock’s value.
Investors may be so confident in a trial’s results that success is already baked into the price.
You could buy shares ahead of a trial, hoping for a huge gain, only to see share prices barely move at all.
Other Ways to Invest in Drug and Vaccine Development
Investing directly in pharmaceutical businesses like Pfizer can be exciting, but risky.
There are other ways that you can get exposure to the industry without putting all of your eggs in one basket.
Diversifying your portfolio can help protect you against huge losses if the business you’ve invested in fares poorly.
Mutual funds and ETFs
One popular way to diversify your portfolio is to invest in mutual funds or ETFs.
These make it easy to own shares in dozens or hundreds of companies while only buy shares in a single fund.
Many funds focus specifically on medical and biotech companies, making it easy to invest in companies focusing on producing new vaccines and drugs.
Most mutual funds and ETFs will publish a list of their holdings. If you want to make sure that some of your investment goes toward a specific stock, such as Pfizer, you can read the fund’s disclosures to make sure that it holds the company you’re interested in.
Robo-advisory services aim to help you create and manage an investment portfolio with less effort on your part.
They will ask you a set of questions to identify your risk tolerance, financial goals, investment preferences, and more.
For example, you may want to choose a portfolio that is focused more on science and technology, which may include Pfizer as a part of their fund options.
Robo-advisory services usually charge an annual fee based on the total assets under management. They may offer additional features such as tax-loss harvesting and automatic rebalancing.
How to Buy Pfizer Shares
If you’ve decided that buying shares in Pfizer is the right strategy for you, the first thing that you’ll want to do is open a brokerage account.
Open a brokerage account
Brokerage companies are companies that facilitate investment in stocks, bonds, ETFs, mutual funds, and other securities.
There are many brokerage companies out there, each with its pros and cons.
Some companies, such as Fidelity and Vanguard, offer brokerage accounts and manage their own line of mutual funds and ETFs. If you like a certain fund, that could influence the brokerage you want to work with.
Another thing to consider is that each brokerage will have different account maintenance fees and trade commissions. Some also offer perks like research tools or exclusive analysis that may influence your choice of company to work with.
Once you’ve chosen a brokerage to work with, you have to open an account.
That typically means filling out an application, providing some identifying information, and linking a bank account that you can use to fund your brokerage account.
Place a buy order
When you’re ready to buy shares, you’ll have to place a buy order. There are two types of orders you can use to buy shares, each with pros and cons.
The most common is the market buy order. With this order, all you have to do is specify the number of shares you want to buy. Your brokerage will buy those shares for you at the cheapest price available.
With a buy-limit order, you specify the number of shares to buy and the maximum price you’ll pay. Your broker will buy those shares at the cheapest available price, but not if the cheapest price available is above your limit.
Market orders are simpler to place but can be unpredictable. You’ll buy shares at the cheapest available price, even if that price is far higher than you expect to pay. This can often happen if you’re buying shares in companies that are not frequently traded.
Limit orders are generally safer because you can guarantee the maximum price that you’ll pay.
The drawback of limit orders is that they run the risk of not going through at all. If the share’s price jump above your limit and don’t come back down, you’ll never buy the shares.
Consult an Advisor
Investing, especially when you’re buying shares in pharmaceutical companies, can be exciting, but you have to remember the risks involved.
Successful vaccine and drug trials can produce huge gains in the stock price, but failed trials can cause prices to plummet.
Consulting with an advisor to help you make good investing decisions is a good way to make sure you don’t risk too much of your portfolio on high-risk stocks.
As with all investing, you are putting your money at risk, so only invest money you can afford to lose.