The Sunday Times - UK (2022-02-06)

The Sunday Times February 6, 2022 13

MONEY

$34

The price Cowie paid for Pfizer

shares in February 2021. They

cost $53 this week

First I had a boost from the Covid jab,

now I’ve been pepped up by the pill

Ian Cowie Personal Account

nearly 4 per cent of the total.

It wasn’t easy getting here, so here are

some lessons learnt that may be useful

more generally. Starting with when the

pandemic panic struck two years ago,

and many commentators sagely advised

selling after share prices plunged. I was

one of the few who pointed out that this

would turn paper losses into real ones.

Instead, I held on to what I already owned

and continued buying at bargain prices.

This is what I said here on November 8,

2020: “I believe humanity will win the

war against the coronavirus. I don’t know

when, or how many casualties there will

be before that, but I suspect investors

who surrender now will regret doing so.”

That turned out to be the day before

PFE announced it had a vaccine that

reduced the risk of infection, and global

share prices surged. I kicked myself for

failing to buy PFE. Then the buzz wore off

and the price fell back to where it was

before the breakthrough.

So I invested at $37 a share in January

2021, when they were yielding 4.2 per

cent. Within a month they had slipped to

2.23 million courses of another antiviral

pill, called molnupiravir.

WWH has had a surprisingly sickly

year, but I bought more shares at a

52-week low of £29.95 during the January

jitters. Demand for new drugs is not going

away, and WWH hit £32 before trading at

£30.50 on Friday after this week’s stock

market sell-off.

The most important lesson of the coro-

navirus crisis for long-term investors is to

beware of succumbing to short-term

doom and gloom. If you are going to

panic when prices fall, stay away from

shares.

More positively, if we are planning to

pay for retirement that is more than a

year away, why should we care what

markets do tomorrow or today? What-

ever cynics say, investing in healthcare is

one way to do well by doing good.

Probably the investment mistake I make

most frequently is to fall into “value

traps” where the price of a high income

today is low returns tomorrow. Too

tempting a dividend yield can turn out to

be a warning of trouble to come.

My excuse is that, contrary to what

some folk seem to imagine, my main aim

is not to shoot the lights out with capital

gains in any calendar year. That might be

fun for funds fantasists, playing games

with imaginary money, but I am more

interested in the real thing.

In particular, I aim to generate enough

income from investments to pay for life

after work, and favour shares that might

sustain rising dividends over time.

While the past is not necessarily a

guide to the future, it does provide one

factual basis on which to guess. So I am

delighted to report that the Association

of Investment Companies (AIC) has

reinstated extensive details of dividend

growth achieved by each of its

investment trusts and their sectors.

This data briefly disappeared during

a redesign of its excellent website that

reminded me of Hutber’s law:

“improvement means deterioration”.

Fortunately, unlike most financial trade

bodies, the AIC listens to small investors.

We can now see the average trust in its

global funds sector increased dividends

over the past five years by 5.2 per cent;

those in UK All Companies delivered

6.2 per cent and, most surprisingly,

North America surged 9.3 per cent.

That suggests the quest for income

should be international, and it may pay

to accept less at first to obtain more later.

Start small

and go for

greater later

6.2%

Annualised increase in dividends paid

by investment trusts in the UK All

Companies sector over past five years

T

housands of lives could be

saved by a new pill for people

with Covid (including the

Omicron variant) that will

become available through the

NHS on Thursday. This is a

game changer for folk who

are not vaccinated, including

an estimated 80,000 NHS

workers, because it can

reduce the risk of fatality after individu-

als have fallen ill.

Of course, there may be some politi-

cians, actors and others who prefer

bleach or horse-deworming drugs. That

is a matter of individual choice and this

non-scientist would not dream of inter-

fering.

Instead, I will admit to being pleased

that Pfizer (stock market ticker: PFE)

continues to lead pharmaceutical

innovation in the war against

the virus. There is no need to

take my word for this,

because the Food and Drug

Administration (FDA) in the

US has authorised the new

pill, Paxlovid.

Here’s what Britain’s

health secretary, Sajid Javid,

said: “This is an important

milestone, especially as Pax-

lovid has been shown to reduce the

risk of hospitalisation or death for vul-

nerable patients by 88 per cent, meaning

potentially thousands of lives could be

saved.”

Three pills taken twice daily for five

days, preferably soon after infection,

comprise a course of treatment. Leaving

the health and science aspects for others

to discuss, this PFE shareholder notes

that massive sums are needed to develop

new drugs — and most of this money is

lost on those that don’t work.

On the other hand, the US government

has agreed to pay $5.29 billion (£3.95 bil-

lion) for ten million courses of Paxlovid,

and the NHS has ordered 2.75 million

courses. Barclays Equity Research esti-

mates that the drug could add between

$15 billion and $25 billion to PFE’s global

revenues this year.

Even for a pharmaceutical giant, if you

can boost annual sales by more than a

dozen billion dollars here or there, pretty

soon you are talking serious money.

Coming down from the clouds, this small

DIY investor is delighted to see that PFE

has become the fifth-most valuable

constituent of my “forever” fund, worth

the FDA was considering Covid pills, and

added: “PFE traded at $47 last week and

continues to yield nearly 3.6 per cent

income. They might have further to go if

the Covid tablets prove popular; most

people would rather pop a pill than be

jabbed.”

Since then, PFE spiked to $62 in

December before slipping in the January

sell-off to trade at $53 ex-dividend this

week. That means buyers today won’t get

the next distribution but, over the longer

term, can expect 3 per cent income.

It is important to be aware that divi-

dends are not guaranteed. However, I

note that PFE has increased them by an

annual average of 6.3 per cent over the

past five years. If that rate of ascent is

maintained, it would double sharehold-

ers’ income in 11 years and five months.

Either way, it beats the measly 0.7 per

cent yield on Worldwide Healthcare

Trust (WWH), my ninth-most valuable

shareholding. This investment trust,

which I have held for more than a decade,

offers diversified exposure, including

Merck (MRK), which sold the NHS

ST DIGITAL

Read a full list of Ian Cowie’s

‘forever’ fund

thesundaytimes.co.uk/cowieholdings

$34, so I bought more, boosting this

holding to 2 per cent of my life savings

and reporting those facts here.

Since Covid is by far the biggest story in

the world — possibly even more impor-

tant than parties in Downing Street — I

make no apology for returning to it

frequently. In November I reported that