Is Pfizer turning around?; All eyes are on the Federal Reserve; High economic uncertainty rewards those willing to buy and hold

1) Picking up where I left off yesterday with articles of interest regarding stocks I've written about, here's an article in yesterday's Wall Street Journal about struggling pharma giant Pfizer (PFE): Pfizer Has a New Playbook for Reviving Sales – and It's Starting to Pay Off. Excerpt:

The beleaguered drugmaker's shares still haven't recovered from their post-Covid slump, and shareholders are wary. But sales of products such as Nurtec and the vaccine Abrysvo that the company has been counting on are rising, and an activist shareholder's push has lost steam.

Pfizer did it by shaking up its U.S. sales strategy, shifting where it deploys its sales representatives, how they market to doctors and how the company helps patients pay for their prescriptions.

Chief Executive Albert Bourla says the company is on an upswing, after Pfizer beat analyst estimates recently for the fourth consecutive quarter.

"Everything is clicking," Bourla said.

I wrote negatively about Pfizer on October 8, October 10, and October 11. But in my October 28 and February 14 e-mails, I shared the bull case for the stock by my friend Jeffrey Sonnenfeld, professor at Yale School of Management, and his colleague Steven Tian.

The stock is down 10% since I first wrote about it, so my initial instincts were correct. In particular, I was scared off by the crash in the company's free cash flow ("FCF"), which had fallen to around $5 billion annually, as this chart from my October 8 e-mail shows:

This didn't come close to covering the $9.5 billion the company was paying out in dividends each year. And Pfizer already had high debt levels, as you can see in the two charts below from the same e-mail. This made me worry the company might have to cut its dividend, which would likely crush the stock:

So, after reading the bullish WSJ article yesterday, the first thing I did was pull up Pfizer's latest cash-flow statement, this time by quarter, going back five years:

You can see what worried me back then: FCF had been declining for years and actually turned negative in the second quarter of 2023 and 2024. That, combined with the high debt, was a deal-killer for me.

But since then, Pfizer has reported two very strong quarters, with a combined FCF of nearly $12 billion, which makes me think its dividend – currently a very high 6.6% – is safe.

So with both qualitative and quantitative signs that a turnaround is underway – and the stock 10% lower – is it time to pull the trigger?

I don't know yet... But it has definitely moved up my list to warranting more research, which is exactly what my team and I here at Stansberry Research do every day.

If we decide PFE is compelling enough to add to our Stansberry's Investment Advisory model portfolio, subscribers will be the first to know. We're always on the lookout for well-run companies whose shares have become too cheap to ignore, like our latest recommendation from earlier this month.

So if you aren't already an Investment Advisory subscriber, you can learn how to become one – and gain immediate access to our full portfolio of open recommendations and archive of past issues – by clicking here.

2) All eyes are on the Federal Reserve today, which is almost certain to leave interest rates unchanged, but it may give hints about future moves. This New York Times article lays out the tremendous economic uncertainty that exists today: An Uncertain Economic Moment Poses a Big Test for the Fed. Excerpt:

Outright stagflation remains a remote prospect: The foundation of the U.S. economy is still solid, and it will take quite a big shock for it to crumble. But what once appeared to be a historic soft landing – with the Fed wresting control of rapid inflation while keeping the economy intact – looks increasingly vulnerable.

When the Fed wraps up its policy meeting on Wednesday, it is widely expected to hold interest rates steady at 4.25 to 4.5 percent. Mr. Powell recently downplayed the need for any imminent changes to borrowing costs, saying the central bank was focused on "separating the signal from the noise" when it came to the Trump administration's policies. With the economy in a good place, he said, the Fed is "well positioned to wait for greater clarity."

But if the economy starts to crack and inflationary pressures grow – a situation that consumers increasingly fear – the Fed's policy decisions will take on an entirely new degree of difficulty. That risks putting the central bank more squarely in the cross hairs of Mr. Trump.

"The Fed certainly has a dilemma," said Mahmood Pradhan, head of global macro at the Amundi Investment Institute, an asset manager. "The Fed has no control of this backdrop, no control of the policy uncertainty and no control of the volatility of this discussion on tariffs. It's a very tough hand they've been dealt."

3) Two charts posted by Liz Ann Sonders, chief investment strategist at Charles Schwab, tell two different stories.

The first shows industrial production in February was up strongly, well ahead of expectations:

But the second shows a sharp decline in restaurant and bar retail sales:

It certainly looks scary... But is it actually something to be worried about? For insight, I texted a friend whose wholesale business sells into this channel, and he replied:

Our consumable sales are flat relative to last year, but bookings for new projects fell off a cliff in January and has been slower than normal in Feb. and March. I could imagine bumping through without a recession, but it'll depend on whether we can get some predictability in the market. Everyone is just holding off for some more certainty.

4) So there you have it, folks: There's a lot of uncertainty out there, as shown by this chart:

But as history shows, those with the courage to hold – and, ideally, buy – during times of high uncertainty have been well rewarded.

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.