Three Non-AI Stocks to Buy: MRK, UPS, CVX
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What are the opportunities outside the world of AI? You're listening to Motley Fool Money.
Welcome, Fools. I'm your host, Tim Byers, and with me are longtime Fools, Carl Thiel, and first-time Monday podcast, Anthony Chavone. Ant, how you feeling? Fellas, we doing well? Fully caffeinated, I hope?
Fully caffeinated, Tim. Feeling good.
Excellent. This is good. Today, we're talking about non-AI stocks. Seriously, we are being serious about this. Non-AI stocks. Did you even know that there was such a thing as non-AI stocks? We'll be digging into reports from four stocks, really three stocks that we don't often talk about and give a buy, sell, or hold rating on each as we do. Let's get into it, starting with Carl. This Close to $10 billion deal. I'm rounding up, but it's not quite $10 billion, but a $10 billion deal between Sedara, that is ticker CDTX, and Merck, the pharmaceutical giant, MRK. What's going on here? This is a strategic purchase, I assume here. It's a lot of money. So what are we getting here?
This is a good old-fashioned product-slash-platform deal in the sector. What Sedara does is, most directly, what Merck is buying right now is an influenza drug that shouldn't be subject to year-to-year variation. It's a different way of going after influenza. You can see why that would be a relatively big deal. There's a lot of flu shots given out every year.
Seems timely, yeah.
Yeah. I think it's interesting on a number of levels. One is just that usually, M&A in the pharma sector is just dominated by oncology, and it still is. But we've seen a lot more start going to these broader health issues around obesity and around, in this case, infectious disease, so influenza. The other reason I think it's super interesting is just that it came at a huge premium. I'll say. Yeah, $9.2 billion all-cash deal, 109% premium to where Sedar was trading before that. I just think that that gets at continuing some mispricing in the sector. You expect an M&A deal to come at some premium, but that's a pretty big one.
One of the things I saw here, Karl, again, $221.50 in cash, that is more than double the prior closing price, huge premium here. I want to ask whether or not that is a premium that Merck feels it must pay. order to get an active drug that fills a pipeline because one of the things i saw in the notes i and bear in mind i rely on you for 100 of my insights as it relates to pharmaceuticals and biotech but there is apparently a patent cliff upcoming for merc in in the form of a blockbuster cancer cancer drug called keytruda Does this help fill the gap? And is that the reason the premium is so big?
Yes, it helps fill the gap. The Keytruda patent cliff is a major, major deal for Merck, and it's no mystery to anybody who invests in the stock. Is it the reason the premium is so big? Not necessarily. I actually don't think that Merck is paying an outrageous amount for the company, given that this could be not only a broader drug than that. This was initially looked at as something that's just for very high-risk influenza patients. patients, FDA has actually come back and given them the green light to make it potentially a slightly broader drug. Then you could turn around and use this same platform and plug it into other infectious disease agents like fungal disease and things like that. I don't think they're paying an outrageous amount, actually.
It's a little different than, say, another $10 billion deal that just closed last week, which is Pfizer-Metzera, where I think they paid a huge premium.
Let me get your take on this then, and then we're going to keep moving. Buy, sell, or hold Merck on the basis of this deal? Is this one that you expect to see compounding value at Merck, or where are you at?
I think I'm okay. I think I'm a buy on Merck, just because I think Merck is attractively priced relative to the rest of the market. As to whether this deal comes out a winner, obviously, that depends on a lot of things. But the data has looked good for this approach, and so I'm modestly bullish on this.
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