Here’s why AstraZeneca shares are a great buy for me

AstraZeneca is a low-risk stock, but it has also given strong returns over time.

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When I last wrote about AstraZeneca (LSE: AZN) around two months ago, its share price had started inching up after trending downwards for months before that. I had concluded that it would continue to rise. 

The AstraZeneca share price is rising

That is exactly what happened. The AstraZeneca share price has risen 8% since. 

I was expecting this based on a number of reasons. First, there’s its past performance. If I had bought AstraZeneca shares five years ago, I would have seen some neat gains of 114%. But patience is key with this stock. If I had bought it one year ago, I would have barely made any gains. In the interim, the stock actually rose to all-time highs but started sliding down shortly after. 

Approval for new treatment

This kind of short-term fluctuation can get cancelled out for stocks that have inherent value to them. And there is indeed value to the AstraZeneca share. 

Just earlier today, the company announced new forays. Its lung cancer treatment, developed with the Hong Kong-based Hutchmed, has been approved by China, which accounts for a third of lung cancer patients. Another of the Anglo-Swedish company’s treatments for lung cancer was approved by the European Union (EU) last month.

End to vaccine woes

After some confusion over whether or not it was effective, two separate studies have shown that AstraZeneca’s Covid-19 vaccine is indeed effective against variants. Even though the company has always maintained that it does not intend to make profits from the vaccine developed with the University of Oxford, there is a reputational advantage to providing effective vaccination. 

In another article today, I talk about the case of GlaxoSmithKline in this regard. While it announced last year that it will develop a Covid-19 vaccine along with the French pharmaceutical company Sanofi, it is still in progress. As a result, it has missed out on the initial vaccination push. The company’s share price has tumbled over the past year. While this is due to several reasons, I think slow vaccine development may have disappointed investors too. 

Coming back to AstraZeneca, vaccine effectiveness has not been its only challenge in recent months. The company has also suffered some damage recently from its friction with the EU over delivery of the vaccines. However, a court ruling has provided some relief to the pharmaceuticals biggie. The EU wanted it to deliver vaccines in a hurry or pay a huge fine. The court has not mandated this for AstraZeneca. 

What I’d do now

So things appear to be falling in place once again for AstraZeneca. The EU issue is partly resolved, its vaccine is effective, and its new treatments are being approved. Its financial performance is already strong. At the same time, its current share price is far lower than it was at last year’s high points. I think it can gain further from here. I’m thinking of adding to my holding of AstraZeneca shares. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Manika Premsingh owns shares of AstraZeneca. The Motley Fool UK has recommended GlaxoSmithKline. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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