In this special “new year” edition of Wealthy Retirement, we’re running a stock through the Safety Net model and The Value Meter… at the same time.

Using these two popular methodologies in tandem – one for dividend safety, the other for valuation – can give us a more complete picture of whether a stock is worth investing in.

Without further ado, here’s the first-ever combined edition of Safety Net and The Value Meter… featuring a company that just made a potentially industry-changing announcement.

Chief Income Strategist Marc Lichtenfeld

Safety Net

Now that the calendar has turned to 2026, lots of folks are making promises to themselves that they won’t keep. However, one resolution just got much easier.

Losing weight.

GLP-1 (glucagon-like peptide-1) drugs have been game changers for patients and the pharmaceutical companies that make them. Now, oral GLP-1 drugs will again move the needle significantly for customers and drugmakers.

Last week, Danish pharmaceutical giant Novo Nordisk (NYSE: NVO) received FDA approval for an oral version of Wegovy, which was previously available by injection only. The change to the company’s financial picture will be momentous.

We won’t have the full 2025 figures until next month, but free cash flow is projected to come in at $7.7 billion, a 28% decline from 2024’s $10.7 billion and 36% below 2023’s total.

However, because of the new approval, free cash flow is expected to jump 34% to $10.3 billion in 2026 and another 27% in 2027 to $13.2 billion.

The sharp decline in 2025’s free cash flow costs Novo Nordisk a couple of points on its dividend safety rating.

Another issue is the payout ratio.

Novo Nordisk is expected to have paid shareholders $7.1 billion in dividends in 2025. If free cash flow slid 28% as projected, the payout ratio would rise to 92%, which is way too high.

This year’s projected $8.1 billion in dividends would lead to a payout ratio of 78% based on the consensus cash flow estimate. That is also too high, but it’s within spitting distance of the 75% threshold for Safety Net. If cash flow is a little higher than expected (or dividends paid is a little lower) in 2026, the payout ratio may come in below the 75% level, and the company would not be penalized.

In 2025, American investors received two semiannual dividends totaling $1.73 per share, which comes out to a 3.3% dividend yield.

In its local currency, the Danish krone, Novo Nordisk has raised its dividend for 31 consecutive years – though American investors may have seen slight reductions because of currency fluctuations.

Due to falling cash flow and a too-high payout ratio, Novo Nordisk’s dividend safety rating is low. But this is an unusual situation with the company’s fortunes about to change dramatically due to oral Wegovy.

Combine that with a three-decade run of annual dividend increases and a likely upgrade this year, and the dividend should be okay despite the poor rating.

Dividend Safety Rating: D

Director of Trading Anthony Summers

The Value Meter

Sometimes the best businesses make only decent stocks – not because the company slips, but because expectations outrun what the cash can reasonably deliver.

That’s the situation with Novo Nordisk today. The business is still excellent. The stock, after a long reset, is finally being treated with more discipline.

The company is the unquestioned global leader in diabetes and obesity treatments. And Ozempic and Wegovy – overnight name brands, it seems – have reshaped how investors think about the company.

For a while, the market assumed that dominance meant inevitability. But recent results remind us that even great businesses have limits.

Over the first nine months of 2025, sales rose 12%, or 15% at constant exchange rates. Operating profit increased 5%, held back by roughly 9 billion kroner (roughly $1.4 billion) in restructuring costs tied to a companywide transformation. Free cash flow came in at 63.9 billion kroner (about $10.1 billion). That’s lower than the previous year, but still substantial.

Capital spending climbed as Novo expanded its manufacturing capacity. That spending isn’t optional. It’s the cost of staying competitive in GLP-1 therapies. Management also narrowed guidance and lowered growth expectations for diabetes and obesity treatments.

Novo trades at an enterprise value-to-net asset value ratio of 8.43, well above the universe average of 3.82. On that metric alone, the stock still looks expensive. The market continues to pay a premium for quality.

Cash flow is what keeps that premium from becoming a problem. Novo generates quarterly free cash flow equal to 11.28% of its net asset value. The universe average is just 1.12%. In plain terms, the company turns its assets into cash about 10 times more efficiently than the typical company. That matters.

Novo is consistent too. While the Safety Net model rewards year-over-year cash flow growth, The Value Meter prioritizes quarter-over-quarter growth. Over the past 12 quarters, the company grew its quarterly free cash flow 54.5% of the time, compared with 46.7% for peers. It also produced positive free cash flow in each of the past 12 quarters.

This isn’t a lucky stretch. It’s a durable pattern.

As we saw above, however, the stock has gone through a humbling year. Shares peaked in mid-2024 and slid through much of 2025.

That move wasn’t driven by collapsing fundamentals. It was driven by disappointment. Investors stopped paying for perfection.

That change is important. Novo is not cheap in absolute terms. You are still paying for elite assets. But you are no longer paying as if nothing can go wrong.

The business earns its valuation. The balance sheet is strong. The cash engine is real. What’s different now is the margin of safety. After the sell-off, it finally exists.

This isn’t a stock for traders chasing excitement. It’s for patient investors who want exposure to a world-class cash producer after expectations have cooled. The upside may be quieter from here, but it no longer depends on flawless execution.

The Value Meter rates Novo Nordisk as “Slightly Undervalued.”

The post Novo Nordisk: What’s Next for the Pharma Giant? appeared first on Wealthy Retirement.

The stock currently yields 4.5%. But can it continue to pay its $0.57 per share quarterly dividend despite an expected decline in its free cash flow next year?

Bristol Myers Squibb has 35 approved drugs, including well-known names like blood thinner Eliquis and cancer fighters Opdivo and Revlimid.

This year, revenue and earnings are forecast to dip, though free cash flow is projected to grow considerably from 2022’s total. However, next year, while earnings are expected to recover, free cash flow will drop, according to Wall Street analysts.

In the Safety Net model, there is no sin bigger than falling cash flow.

However, the drug giant’s other numbers are very solid. The company will likely pay out about $4.6 billion in dividends this year, which is just 30% of its expected free cash flow. Next year’s predicted $4.8 billion in dividend payouts should result in a payout ratio of just 33%.

Those numbers are quite low and make the dividend quite affordable.

Should free cash flow continue to head south in 2025, the company’s dividend safety would likely get a downgrade. But given Bristol Myers Squibb’s low payout ratio and its strong track record of 14 straight years of dividend increases and 44 straight years without a dividend cut, the current dividend is very safe.

Dividend Safety Rating: A

If you have a stock whose dividend safety you’d like me to analyze, leave the ticker symbol in the comments section. You can also take a look to see whether I’ve written about your favorite stock recently. Just click on the word “Search” at the top right part of the Wealthy Retirement homepage, type in the company name and hit “Enter.”

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They achieved the very best-case scenario.

Given how front and center these companies have been over the past year, you would think investors would have some love for them.

Strangely, that is not the case.

The MVIS US Listed Pharmaceutical 25 Index currently trades at the biggest discount to the S&P 500 that we have seen in 20 years.

While the S&P 500 trades at a rather expensive 22 times projected 2021 earnings, Big Pharma trades at just 13 times projected 2021 earnings.

That is a big discount. The pharmaceutical sector trades at one of the lowest valuations of any group in the market.

The last time the sector was this cheap in absolute terms was 2011.

Not coincidentally, 2011 was a great time to be a buyer of these stocks.

From 2011 through the middle of 2015, pharma stocks doubled the performance of the S&P 500.

As per usual, investors who paid attention to value were well-rewarded.

Now the pharma sector is cheap again.

Since that great pharma run that ended in 2015, the stock prices of these companies have badly trailed the market…

While the S&P 500 has almost doubled since 2011, the pharma sector hasn’t done anything.

In fact, since mid-2015, the pharma sector is actually down slightly.

After widely outperforming from 2011 to 2015, the sector was no longer cheap – it was expensive.

The performance from 2015 onward has been the product of an expensive starting point.

Now, after the sector underperformed for almost six years, these stocks are cheap again.

Now is the time to be a buyer again…

Someone Else Has Noticed the Value in Pharma Stocks

Without a lot of fanfare, the Oracle of Omaha himself has started putting some money to work in the pharma sector.

As of his last required reporting date of December 31, 2020, Warren Buffett’s Berkshire Hathaway (NYSE: BRK-A) owns more than $7 billion worth of stock of three Big Pharma companies.

The companies are Merck & Co. (NYSE: MRK), AbbVie (NYSE: ABBV) and Bristol Myers Squibb (NYSE: BMY).

Buffett has been steadily accumulating shares of these companies since the third quarter of 2020.

Normally, Buffett makes large, concentrated bets on individual stocks.

The fact that he has spread this bet across three companies shows that he thinks the entire sector represents good value.

An obvious way to play the value in this sector is to jump on Buffett’s coattails and buy the same three stocks.

All three are very cheap relative to their expected 2021 earnings.

AbbVie trades for less than nine times what it is expected to make this year. Bristol Myers Squibb trades for barely more than eight times earnings, and Merck trades for just more than 11 times earnings.

For perspective, that means all three companies trade for half the valuation of the overall market.

They come with big dividends too…

AbbVie yields 4.8%, Bristol Myers Squibb yields 3.2% and Merck yields 3.5%.

So these three stocks have Buffett’s stamp of approval, very cheap valuations and big dividend yields.

That is a lot to like… but there’s more.

These companies have great balance sheets that are loaded with cash and carry little debt.

That gives them dry powder to scoop up smaller, faster-growing biopharma businesses that can add to their revenue-generating drug portfolios.

In a market where so many stocks are looking very expensive, this sector represents good value.

Good investing,

Jody

The post Why Now Is the Time to Buy Big Pharma appeared first on Wealthy Retirement.

Do Knicks fans wish they had landed Kevin Durant?

Phase 2 trials are my favorite time to get involved in a biotech company. I’ll explain why in a moment. But first, a quick review of the phases of clinical trials…

The Three Distinct Phases of Clinical Trials

Before a new, experimental drug is tried in humans, it’s put to work in test tubes and then animals. Once it’s ready for human trials, it’s tested in three distinct phases.

A Phase 1 trial is conducted with a limited number of subjects, usually fewer than 50. In cancer trials, the drug will be given to patients sometimes as a last resort.

For drugs targeting many other diseases, they’re given to healthy volunteers so doctors can better understand how the drug reacts inside the human body.

If a drug is deemed safe after this period, the company will proceed to Phase 2. This trial usually consists of a few dozen to several hundred patients receiving varying dosage levels of the particular drug.

The data that’s considered most accurate is from a trial that’s double blind (neither the patient nor the doctor know whether the patient has received the drug) and placebo controlled (compared with a placebo or standard of care).

Some, but not most, Phase 2 trials are double blind and placebo controlled.

In Phase 3, companies test hundreds to thousands of patients. If the data proves that the drug is safe and effective, the company will usually apply for approval.

Naturally, the more patients who take part in a trial, the greater the chance the drug fails. For example, the drug may not work, or there may be unexpected side effects. This is especially common in cancer trials, where the response rates are low, even with approved drugs.

Positive results in Phase 3 can push a stock higher as investors begin focusing on approval and the sales and profits that could follow.

However, it doesn’t always work that way. Many drugs with seemingly strong Phase 3 results have been rejected by the FDA for one reason or another. This can crush investors who followed a drug stock all the way to the end.

Alkermes (Nasdaq: ALKS) is a great example. Investors got their hopes up when Phase 2 data showed that Alkermes’ antidepressive drug ALKS 5461 was safe and effective for patients who did not respond adequately to standard therapies… Yet the FDA rejected it, and shares tanked.

This is one reason Phase 2 is the real sweet spot for biotech investing…

Phase 2 Trials: A Profitable Time to Be Involved in Biotech Stocks

Phase 2 is often the most profitable time to be involved in a small cap biotech stock. Many times, Phase 2 results are positive. Sometimes it’s because the drug works. And other times it’s because the trial is rigged to provide positive results.

For example, Cel-Sci (NYSE: CVM), a company that stirs passion (both positive and negative) among biotech investors, ran a Phase 2 study on the head and neck cancer drug Multikine.

However, rather than being tested against other existing treatments, Multikine was given along with an existing treatment.

At the end of the trial, Cel-Sci boasted a 12% complete response rate. But it was impossible to determine if the two out of 19 patients who had a complete response saw their tumors disappear due to Multikine or due to the other treatment.

So why would a company do that?

To show good results in the hopes of raising additional capital.

There are also times when the science is conducted properly and Phase 2 claims are valid, but the drug isn’t able to replicate results in a Phase 3 trial. Remember, a Phase 2 trial usually contains a much smaller sample size, which can easily distort results.

Very often, when a company reports strong Phase 2 results, the stock takes off, as it is the first real indication that it might be approvable. Investors get excited, potential partners begin sniffing around and the media begins to cover the drug’s potential.

Even though at this point things are just starting to get promising, it’s often a great time to take the money and run.

Here are a few great examples…

Dermira released positive Phase 2 results for its drug lebrikizumab – an immunosuppressive used to treat asthma – in 2019. The stock doubled in value almost immediately.

Novocure (Nasdaq: NVCR) – one of my past recommendations in my biotech trading service, Lightning Trend Trader – released strong Phase 2 results in September 2018.

We closed out a 228% gain on my options recommendation one month later.

Another time, I recommended Regeneron Pharmaceuticals (Nasdaq: REGN) following positive Phase 2 results. Soon thereafter, we closed out a 108% options gain.

Phase 3, on the other hand, is fraught with risk. These trials are expensive to run, and there’s no guarantee that the drug will again show strong results.

For example, there have been some instances where the drug replicated its earlier results, but there was a stronger-than-expected response from the placebo group, narrowing the difference that the drug made and making it appear less effective.

Phase 2 Takes Off and Fails in Phase 3

There are many instances of stocks that have taken off during or after Phase 2 results, where investors made lots of money but then suffered losses when the drug failed in Phase 3.

Here’s a great example…

Several years ago, my subscribers made money on Medivation despite a disastrous Phase 3 trial that resulted in the stock plummeting.

Medivation had a drug for Alzheimer’s called Dimebon. The Phase 2 results were outstanding.

They showed a slower deterioration and fewer side effects than the existing therapies, including Pfizer‘s (NYSE: PFE) Aricept.

Despite skeptics’ doubts, the stock ran in anticipation of Phase 3 results. If the data was strong and the drug got approved, it would likely be an immediate blockbuster.

After the stock doubled, I recommended that subscribers take half of their profits off the table.

Note, this is not the usual Oxford Club philosophy, but with small cap biotech stocks that can plummet on one piece of news, I often suggest readers take their risk capital off the table once the stock has risen 100% or more.

So with investors now playing with the “house’s money” after taking their initial investment back, we waited for the Phase 3 results.

As it turns out, the drug didn’t work.

The stock got crushed, and we sold out our remaining position. But because we had sold half at a 100% profit, we still pocketed a 37% gain. Not bad for a failed drug…

If the Smart Money Leaves… Take Your Profits and Follow

There have been several other instances where something similar has occurred.

I recommended Celldex Therapeutics (Nasdaq: CLDX) right before the company released positive Phase 2 clinical trial data on its treatment for triple-negative breast cancer… and the stock surged 419%.

We also made 102% gains on Delcath Systems (Nasdaq: DCTH) and 42% gains on Mela Sciences, despite FDA rejections.

Although in these cases the Phase 3 trials were not deemed a failure, the FDA rejected the applications for approval until more questions were answered.

Lastly, after positive Phase 2 results, you sometimes see the early investors and venture capitalists exit the position. They’ve made their money and don’t want to stick around for the risky Phase 3. If the smart money is leaving, it may be a good idea to follow them out the door.

At least with part of your investment.

There’s nothing wrong with hanging around to see whether a small biotech company can get the ball across the goal line and get its drug approved.

But considering that less than half of all drugs in Phase 2 actually make it to the market, it’s a smart idea to take profits along the way when you can.

Good investing,

Marc

The post How to Profit From Wall Street’s Top Catalysts appeared first on Wealthy Retirement.

A delayed flight and a misplaced ticket from the airport parking lot postponed the reunion with my bed.

I had woken up at 5 a.m. to catch my flight home from an exhausting and informative week at the J.P. Morgan Healthcare Conference. It’s an exclusive event that is considered to be the Super Bowl of healthcare conferences. I attended for the first time 10 years ago and have returned every year since for one-on-one meetings and company presentations.

I met with numerous CEOs, networked at parties where bottles of $250 whiskey were poured and talked with hedge fund managers about their investments.

Here are a few of my takeaways…

Big Pharma to Start Spending

The big pharmaceutical companies love the new tax bill, which will lower their corporate taxes. At the conference, CEOs of large companies said they’d use the extra cash in their coffers on acquisitions, partnerships, share buybacks and dividend increases.

Income investors looking for strong dividend yields should look at Pfizer (NYSE: PFE), with a 3.7% yield, and Johnson & Johnson (NYSE: JNJ), which yields 2.5%. For those who can handle additional risk, GlaxoSmithKline (NYSE: GSK), which sports a 5.5% yield, is worth considering.*

Acquisitions Could Heat Up

With a dire need for growth, many in the industry expect the larger biotech and pharmaceutical companies to open their wallets and acquire smaller companies with novel drugs in development.

That could make for an exciting year for biotech investors. Some potential acquisition candidates include…

• BioMarin Pharmaceuticals (Nasdaq: BMRN), a drugmaker for rare diseases, has been the focus of takeover rumors for years. The rare disease space is hot, as the drugmakers charge high prices for their therapies and face little to no competition. This could be the year Biomarin finally gets snatched up.
• Amicus Therapeutics (Nasdaq: FOLD) also makes drugs for rare diseases. With a market cap of less than $3 billion*, it would be easily digestible for one of the larger companies.
• The stock price for Seattle Genetics (Nasdaq: SGEN), a former Wall Street darling, is down 27%* from its high last year. The company has an approved product for lymphoma and a deep pipeline.

Good Things Come in Small Packages

What I found really exciting at the conference was meeting with small companies that are doing breakthrough work. These stocks are often too tiny for me to recommend, but here are a few that you might want to dig into and do your own research on…

(Note: These are small and very speculative stocks that come with significant risk.)

• Immutep (Nasdaq: IMMP) is developing cancer treatments based on a target called LAG-3. Other larger companies, like Bristol-Myers Squibb (NYSE: BMY), are also researching LAG-3. But Immutep’s chief scientific officer is the one who discovered it.
• Anavex Life Sciences Corp. (Nasdaq: AVXL) is researching drugs for Alzheimer’s, Parkinson’s and Rett syndrome. Rett Syndrome is a particularly horrible disease that kills males at or before birth and completely impairs females. It cannot be screened for, and there are no approved drugs.
• Microbot Medical (Nasdaq: MBOT) makes a self-propelling robot that cleans shunts in the brain. This prevents them from getting clogged and needing to be replaced, which occurs often.

I typically put in 15-hour days at the conference, but it’s worth it to get a good read on the healthcare landscape and to return with lots of new investing ideas. I’ll have more on the healthcare space as I digest what I learned and conduct more research.

Now, if only someone would invent a drug that would make it so I could get by on four hours of sleep a night…

Good investing,

Marc

*According to Bloomberg Finance L.P.

The post Healthcare Investing Ideas Big and Small appeared first on Wealthy Retirement.

Americans spent $425 billion on prescription drugs in 2015 alone. That’s a record high. And it’s getting worse… Spending is expected to rise as high as $610 billion in just four years!

The scary thing is that most Americans are doing nothing about it. High drug prices have become a troubling “new normal.”

But they don’t have to be. There’s an easy way to ensure that you aren’t paying too much for your prescriptions. And all you have to do is go shopping.

Prescription Drug Shopping

It’s open enrollment time for those of you covered by Medicare or the Affordable Healthcare Act. Now is the time to make changes to your healthcare coverage to ensure you’re paying the lowest price possible for your prescriptions.

Medicare’s open enrollment ends December 7. And the deadline for those covered by the Affordable Care Act is December 15. But most of you won’t take advantage of it and could be stuck paying unnecessarily higher prescription drug prices for the next year.

Medicare Advantage plans usually carry prescription drug coverage called Part D.

But if you have basic Medicare (Parts A and B), you can purchase a Part D plan to help cover mounting prescription drug costs. And right now, existing Medicare enrollees have the opportunity to switch plans.

Part D plan prices and benefits vary greatly. The drugs covered and the prices charged for those drugs can also be dramatically different. That’s why it’s so important to shop around this time of year.

As your prescription drug needs change, your Part D plan needs will likely change too. Your current plan may not be your best option anymore.

A shocking survey found that only one-third of seniors compare prices to save money on their Medicare plans each year. That’s far less than the 54% that say they bargain shop to save money on groceries…

What’s even more startling is that the same study found that seniors see their healthcare costs as more burdensome than their household and utility bills, transportation expenses, or food expenditures.

The High Cost of Complacency

Unfortunately, this complacency could cost you.

There’s a huge difference in the prices providers charge for prescription drugs. One study found the average difference between high and low prices of the 10 most prescribed drugs is $593 per month. That amounts to $7,116 a year!

That’s why it’s so important to enroll in the right plan.

But if all of the choices have you confused, relax. Medicare has created the “Medicare Plan Finder.” This tool easily allows recipients to compare the prices of their prescriptions across Medicare plans.

Even if you’re happy with your Part D plan, you should still spend a few minutes over the next few weeks comparing it with other available plans. Who knows? You could wind up saving hundreds of dollars on your prescription costs.

Good investing,

Kristin

The post Don’t Fill Another Prescription Until You See This! appeared first on Wealthy Retirement.