Why AstraZeneca stock is a buy right now

Fool contributor Ed Jones provides three reasons why he’s bullish on AstraZeneca stock and is considering adding it to his portfolio.

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Right now is the perfect time to get into healthcare stocks, with the industry growing rapidly, accelerated partly down to Covid-19. I believe AstraZeneca (LSE: AZN) is the perfect stock to invest in when it comes to pharmaceuticals and healthcare. Having been founded in 1999, it is fair to say the company is not going anywhere and has forged itself into history with its research and findings.

Here are three reasons for me to invest in AstraZeneca:

Its growth is organic

The company’s growth is unexpected after 20 years of not meeting Wall Street’s expectations. The company’s oncology and cardiovascular drug segments are doing extremely well. The cancer drug trio of Tagrisso, Imfinzi, and Lynparza is consistently growing year-over-year sales by a double-digit percentage, with next-generation type 2 diabetes drug Farxiga delivering 60% sales growth through the first half of 2021. None of these four blockbuster drugs show signs of slowing down anytime soon.

It’s a healthcare stock

To start with, it is a healthcare stock and healthcare companies are highly defensive. We don’t choose when we get ill and what type of illness we may develop. That essentially allows pharmaceutical companies constant work and income. Typically, demands for drugs, devices and healthcare services remains the same regardless of the state of the economy and thus it is a safe bet against a drop in the state of the economy.

To boost this, AstraZeneca offers a 2.56% dividend, which in the current market is very good in my opinion. This is an added bonus to a company whose stock price is up 118.31% in the last five years (as of 6th November). The 2.56% dividend yield is well above the S&P 500 average of 1.3%.

The smart acquisition of Alexion Pharmaceuticals

And thirdly, AstraZeneca made one of the smartest acquisitions in the pharmaceutical space. In July, it closed a cash-and-stock deal to purchase ultra-rare-disease drugmaker Alexion Pharmaceuticals for $39 billion. The biggest buyout in the company’s history lands it a company that faces little competition in the indications it serves.

Even more importantly, Alexion developed a second-generation therapy for its blockbuster drug Soliris. This treatment, known as Ultomiris, is administered less frequently than Soliris, and should have an opportunity to siphon sales from Soliris over time. In other words, Alexion secured its cash flow from potential generic or biosimilar competitors for probably another decade. Alexion also has many other drugs in its portfolio that treat rare conditions and this will be a great asset for AstraZeneca to have.

With sustainable low double-digit sales growth, I am likely to add to my position in AstraZeneca in the next month.

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 considered so you should consider taking independent financial advice.

Ed Jones owns shares in AstraZeneca. The Motley Fool UK has no position in any of the shares mentioned. 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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