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Five Reasons Teva Should Have Pfizer Running Scared

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No matter what happens with health-care reform, this company will rule.

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With fuming Americans lashing out at health-care town-hall meetings across the US, this week, I thought it was only appropriate to discuss the sector today.

Like much of the general public, I'm all rowed up about the Obama administration's plan to reform health care. The possibility of a government-run socialistic insurance program infuriates me. I already pay for my own health insurance, thank you very much.

While the government's reform will, in my opinion, most definitely destroy the quality of health care in the US, its potential impact on health-care stocks is unknown. Thus, just as investors needed to pad their portfolios with recession-resistant stocks over the past 2 years, investors now need to focus on finding government-resistant companies.

That's why I am bullish on Teva Pharmaceuticals (TEVA). Regardless of whether the $1 trillion legislation is passed, Teva should remain a winner in the drug-manufacturing business.

1. While Big Pharma competitors like Merck (MRK) and Pfizer (PFE) will lose pricing power from Obama's pledge to greatly reduce drug prices, Teva's position as the world's largest generic manufacturer will help it flourish. With a 22% market share of the US generic market, Teva will certainly be primed to capitalize on the expected growth for generic drugs.

On the other hand, even if the plan falls through, generic drugs already account for 60% of prescriptions filled, so there's enormous demand for generics with or without a reform.

2. In contrast to the slow- to no-growth expected at large US dug companies like Eli Lilly (LLY) over the next 5 years, analysts peg Teva to grow nearly 18% per year through 2014. Wall Street has high expectations, but they aren't unreasonable.
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No positions in stocks mentioned.
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