How to Invest in AstraZeneca Stock
The onset of the COVID-19 pandemic has led many people to take an interest in medical and pharmaceutical companies.
While many companies are working together to try to create a vaccine or drug to fight coronavirus for the common good, the reality is that the companies that produce effective drugs are likely to see significant profits as governments around the world buy those treatments.
Buying shares in pharmaceutical companies can be exciting for investors who want to profit from successful drug and vaccine trials, but the practice can be difficult and risky.
If a trial succeeds, the company may gain significant value, but a failed trial could see shares plummet instead.
If you’re interested in buying shares in AstraZeneca, here’s what you need to know.
AstraZeneca (ticker symbol AZN) is a British and Swedish multinational pharmaceutical company.
It draws its roots from Astra AB, a Swedish company founded by 400 doctors and apothecaries in 1913. It merged with the Zeneca Group, a British company in 1999 to form AstraZeneca.
The company focuses on producing a variety of drugs and treatments for diseases such as cancer, heart disease, and respiratory diseases.
Today, the company is worth nearly $140 billion. It is working on a vaccine for COVID-19, which it has stated produces some level of immune response in older and younger adults.
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 choose to do fundamental analysis, which means looking at a company’s financial situation, including its cash on hand, revenues, expenses, and debts. It also involves researching new products, or in AstraZeneca’s case, drugs, currently in development.
Investors may also consider factors like the management team’s track record and larger industry trends.
Notable competitors in AstraZeneca’s industry include:
- Gilead Sciences (GILD)
- Biogen (BIIB)
- BioNTech (BNTX)
- Moderna (MRNA)
Other traders rely on technical analysis to guide their investing decisions. This involves analyzing price and trade volume trends to try to predict future price changes.
Keep in mind:
Even if a company looks great on paper and investor sentiment is positive, there’s no guarantee that an investment will succeed.
The company could fail to continue its positive direction, or the market may already have the company’s future growth priced in.
All investment involves risk but investing in pharmaceutical and medical companies brings unique risks that investors need to consider.
The success of any company relies on the products that they develop.
Without successful products, companies won’t be able to produce revenue and will eventually fail. Medical companies can spend millions or billions of dollars on developing and testing new drugs.
If those drugs turn out to be unsafe or ineffective, the company will have effectively spent that money with nothing to show for it.
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 investing in pharmaceutical companies is that drug development can take a long time.
Even for a disease like COVID-19, where governments are funneling millions of dollars to research a vaccine, it’s taken almost a full year for companies to get close to producing trial results.
Under normal circumstances, it can take years for a company to develop and test new medicines. Some companies fold before they manage to test their products at all.
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 in a single company like AstraZeneca can be risky. Any time you invest in a single stock, you’re putting all of your eggs in one basket.
If that stock succeeds, you’ll get a nice payout, but if it loses value, your portfolio will also drop.
Remember to diversify
Diversifying your portfolio is a good way to reduce your risk. Even if one company does poorly, other companies in your portfolio may perform well enough to generate a profit for you.
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.
If you want to make sure you can invest some of your money in a specific company like AstraZeneca, most funds will let you see what shares they own before you invest.
You can use the list of holdings to confirm the companies you’re interested in are included in the fund’s portfolio.
How to Buy AstraZeneca Shares
If you’ve decided that you want to invest in AstraZeneca, the first thing that you’ll need 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.
Some brokerages, like Vanguard and Fidelity, offer their own suite of mutual fund and ETF options, so if you want to invest in mutual funds you might want to choose the company that offers funds you like.
You should also consider things like account maintenance fees and trade commissions when choosing a brokerage to work with.
Some brokerages also offer perks like research tools or exclusive analysis that you 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
Once you’ve opened your account, it’s time to buy shares. When you buy stocks, there are two types of orders that you can place.
If you submit a market buy order, you simply specify how many shares you want to buy. Your broker will buy that many shares at the cheapest price available.
If you submit a buy-limit order, you specify the number of shares to buy and the maximum price you’re willing to pay per share. If the shares are available at or below that price, your broker will execute the order. Otherwise, the order doesn’t go through.
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 in a pharmaceutical company like AstraZeneca can be exciting, but it’s important to remember the risk.
Successful vaccine and drug trials can produce huge gains in the stock price, but failed trials can cause prices to plummet.
Consulting with a fee-only 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.