Invest in Pharmaceuticals, Luxury: Portfolio Manager

European pharmaceutical stocks are cheap, offer high dividend yields and current valuations provide a good opportunity for investors to enter the sectors, Ana Armstrong, managing partner and head of portfolio strategy at Armstrong Investment Managers told CNBC.

European pharmaceutical companies are traded at a 25 percent discount to the broader index based on forecast 2011 earnings.

This low rating reflects concerns about future revenues as companies stand to lose exclusivity on their blockbuster drugs, Armstrong said.

US healthcare reforms and European austerity measures were also weighing on pharmaceuticals.

“They are investing billions in the new research projects. However, earnings expectations are at a 25 percent discount for 2011 which means this massive drug pipeline is being priced at zero,” Armstrong said.

“We can’t ignore the fact that billions of dollars are being invested in further research projects and we can’t be so pessimistic to believe that all that research will not generate any result and any progress. They will also benefit from the ageing population,” she added.

Armstrong also recommended investing in the luxury goods sector and singled out LVHM, Tiffanyand Swatch as favorite stocks.

Demand for high-end European brand names was exceptionally strong in Asia and other emerging markets and she was confident that it would continue to grow robustly.


Disclosure information was not available for Ana Armstrong or Armstrong Investment Managers.