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Who They Are: AbbVie Inc. (NYSE: ABBV) is a Chicago-based Big Pharma firm that makes and markets drugs in the U.S. and worldwide. AbbVie was spun off from Abbott Laboratories Inc. in 2013.
Its blockbuster drugs include arthritis drug Humira and blood cancer treatment Imbruvica.
Why Now's the Time to Buy
Reason No. 3: ABBV Is Dirt Cheap (for Now)
One of the best ways to tell if a stock is trading at a great price is the price-to-earnings ratio.
The S&P 500 PE ratio average is 18. Biotech – AbbVie's industry – has an average of 14.1.
With ABBV shares trading around $66 at time of writing, and earnings per share for 2019 forecast at $8.88, AbbVie's PE is 7.4 – nearly half the industry average.
In other words, this stock is absurdly cheap.
The reason? Increasing threats to AbbVie's top-selling drug, Humira. In 2018, "biosimilars" to Humira – highly similar drugs that get the same clinical results – hit the market in Europe. Humira sales have been slipping ever since.
That pushed ABBV shares down to $65 in June of this year, from an all-time high of $117.97 in early 2018.
But we have reason to believe that drop is behind AbbVie – many reasons, in fact.
Analysts have an average price target of $92.05 for ABBV – nearly 40% above its price at the time of writing.
Among those covering ABBV, three rate it a "Sell," nine a "Hold," and four a "Buy." We suspect an eventual upgrade cycle will help boost shares higher.
Reason No. 2: A New Blockbuster Drug in the Pipeline
AbbVie already has a replacement drug queued up for when it loses U.S. patent protection for Humira in 2023, an anti-inflammatory drug called upadacitinib. It's already seeking FDA approval for the drug as a rheumatoid arthritis treatment.
AbbVie does have a competitor hot on its heels – but AbbVie has an advantage in this potential showdown.
California-based biotech firm Gilead Sciences Inc. (NASDAQ: GILD) also has an anti-inflammatory drug, called filgotinib. Gilead announced it's planning an FDA application this year – much sooner than expected. That could put filgotinib on the market by 2020.
AbbVie, however, currently dominates this market. It would come out of the gate having the commercial "high ground."
Corporate insiders clearly like AbbVie's odds. And that brings us to the no. 1 reason ABBV is a "Buy" right now.
Reason No. 1: Massive Insider Buying
Over two months this summer, five AbbVie corporate insiders collectively purchased close to $10 million worth of ABBV stock.
That's the best "Buy" signal you'll find, anywhere.
Insiders might sell shares they hold in their own company for a number of reasons – to diversify, to buy second homes, for tax purposes, and so on. But they buy for one reason and one reason only: to make money.
Corporate insiders are in a better position than anyone to know the direction their company is headed in.
And here's what AbbVie insiders are "telling" us: Director Roxanne Austin picked up 11,500 shares in June… and another 65,000 shares on July 30-Aug. 1, bringing her total stake to 117,114 shares.
Chief Strategy Officer Henry Gosebruch picked up 30,000 shares on July 29.
Corporate Controller Brian Durkin grabbed 613 shares on July 25. Two other insiders snapped up 37,900 shares in June.
That's five AbbVie insiders betting nearly $10 million that ABBV stock is headed higher – much higher.
Bonus: AbbVie has a 6.63% dividend yield. So even if it takes some time for this stock to take off, you'll be paid well for your patience.
We have a lot of confidence that ABBV has significant upside ahead, which is why we're sharing it with you.
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