BREAKING: Analysis: Berkshire's Bet a Bright Spot in Gloomy Year for Big Pharma Stocks
NEW YORK (Reuters) - Berkshire Hathaway Inc 's new bet on the U.S. pharmaceutical industry signals hope for shares of large drug companies, which have lagged a broad market rally amid concern about efforts to rein in prescription drug prices.
Drug stocks largely outperformed on Tuesday, a day after Warren Buffett's conglomerate, long underweight in the healthcare sector, revealed $5.7 billion of new investments in Abbvie Inc, Bristol-Myers Squibb Co, Merck & Co, and Pfizer Inc, whose vaccine has demonstrated effectiveness in late-stage studies against COVID-19.
Pharma stocks also received a boost after the Nov 3 U.S. elections made clear there would be no overwhelming Democratic sweep, an outcome some investors feared could prompt a major overhaul of drug pricing.
Still, many are reluctant to sound an all-clear on the industry, which is trading close to its biggest-ever valuation gap against the S&P 500 based on forward price-to-earnings ratios, according to Refinitiv Datastream.
Among the issues on investors' minds is whether Democrats can secure a slim margin in the U.S. Senate if their candidates win run-off races in Georgia scheduled for January, a result that could spark volatility throughout the healthcare sector.
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