PFIZER IS A MONEY MANAGER FAVE, AND NOT JUST BECAUSE OF VIAGRA

Taking its cue from sales of the firm’s most popular product, Pfizer Inc.’s stock price has climbed rapidly.

But, unlike the stampede to Pfizer’s anti-impotence drug Viagra, portfolio managers aren’t rushing to scoop up more shares of the New York-based pharmaceutical company. The stock price was $112 per share last week, compared to $75 per share at the beginning of the year and about $40 per share a year ago. Some managers say the stock would be fairly valued at $200 a share.

Pharmaceutical companies are well-liked by money managers for being “recession-proof.” No matter what happens to the economy, they reason, people will have to go on filling prescriptions. And companies like Pfizer and Merck & Co. Inc., another sector favorite, have a steady stream of drugs ready for the market.

Scott Pape, a portfolio manager for institutional separate accounts at Chicago’s Loomis Sayles & Co. Inc., is satisfied with the 750,000 shares, worth about $84 million, that the accounts hold. Pfizer makes up about 3% of the $2.5 billion portfolio.

“We don’t have plans to sell, but we won’t be buying any more shares,” Mr. Pape says. “It has a fairly fancy valuation.”

And that 3% total is high by Loomis Sayles’ standards, Mr. Pape explains. The average weight for a stock is 2%, he says.

overvalued or not

Valuation also is a problem for Nicholas Gerber, who runs the $10 million Ameristock Mutual Fund. Mr. Gerber will invest up to 4% of his fund in one stock, but he has only 0.7% of his fund invested in Pfizer. Shares of the drug company, Mr. Gerber explains, are too unstable for a fund that invests in the “biggest and bluest” of the blue chip stocks.

But Richard Schmidt, the Naples, Fla.-based editor of the Stellar Stock Report newsletter, says he expects Pfizer stock to hit $200 by yearend.

“Viagra alone is going to be a big mover for (Pfizer),” he says. “It could be the biggest selling drug ever.”

Pfizer stock reached its peak of $118.25 on April 24, then sank to about $111, where it hovers today. Granted, the furor over Viagra and the resultant media frenzy has helped drive up the stock price.

Approved by the U.S. Food and Drug Administration in late March, Viagra met with instant success. 0In an industry where 2,000 prescriptions for a brand new drug in its first week is considered strong, 36,000 were submitted for Viagra. Another 113,000 prescriptions were written the second week, while 200,000 followed in the third week.

Celebrities even got into the act of touting Viagra. Former Sen. Bob Dole told CNN talk show host Larry King that he was part of the successful Viagra drug trials. Soon after, his wife, Elizabeth, was described as beaming while agreeing about the drug’s effectiveness.

Also smiling is Fritz Reynolds, portfolio manager for the Larkspur, Calif.-based Reynolds Blue Chip Growth Fund. The average cost of the fund’s Pfizer investment has been $25 a share. The fund’s first Pfizer purchase probably cost from $5 to $10 a share. The most recent purchases cost $75 a share, Mr. Reynolds says.

The fund has 5.7% of its $72 million in assets invested in Pfizer, according to Morningstar Inc. But, Mr. Reynolds says, the fund probably won’t purchase any more Pfizer shares. That is, unless a large inflow of cash lowers its Pfizer stake to 3% to 4% of assets, Mr. Reynolds explains.

Mr. Reynolds steadily increased his share of Pfizer stock because he considers Pfizer the second most attractive drug stock after Merck, based on the quality of its management, research and development and balance sheet.

Other long-time investors note there’s more going for Pfizer than the anti-impotence drug.

“The stock is doing very, very well for the right reason,” says John Dale, portfolio manager for the Minneapolis-based Norwest Advantage Large Company Growth Fund. “It’s not just Viagra. That’s just a part of what has been going on for a half dozen years or more.

more on the way

The Norwest fund, which is managed by Norwest subsidiary Peregrine Capital Management, has 6.21% of its $221.2 million invested in Pfizer.

Mr. Dale insists that Pfizer’s commitment to maintaining a “drug flow” is the spur to the stock’s trajectory. The drug flow means that Pfizer releases new drugs as well as improved versions of its products. Besides Viagra, the company also has a stake in Lipitor, an anti-cholesterol drug, and Celebra, an arthritis medication that the company says is easier on the stomach.

Loomis Sayles’ Mr. Pape says he purchased most of the accounts’ Pfizer shares at $40 to $50. And while he appreciates the upsurge in Pfizer stock, he warns about concerns behind the euphoria. Three possible bubble bursters: a black market in Viagra, insurance reimbursement issues and possible side effects.

Even before men — and women — went gaga for Viagra, Pfizer stock had reached $80 a share. So despite the recent fanfare, the company shouldn’t be considered a one-trick pony, Mr. Reynolds says.

While his fund, for now, has its share of Pfizer stock, he recommends buying on weakness, although that may be hard to find.