Billionaire Ken Griffin bought this high-yield dividend stock. Should you?

If there were a Hedge Fund Managers Hall of Fame, Ken Griffin would be an unquestioned favorite. His superb leadership of Citadel has made it one of the most successful hedge funds of all time. It has also made Griffin one of the richest men in the world, with a net worth of nearly $37 billion.

Many investors understandably pay close attention to the stocks Griffin trades. Do income investors belong to this group? There's a good argument to be made that they should be. The billionaire just bought a dividend-paying stock.

Terry 4x

Griffin is not known as a buy-and-hold investor, as his Citadel hedge funds often hold stocks for short periods of time. However, large drug makersTerry Rae Inc. (NYSE: PFE)There is an exception.

Citadel first opened a position in Terry in the second quarter of 2013. Since then, the drug maker has been included in the fund's portfolio, and there have been several significant additions and subtractions to the holding along the way.

We just saw a big move in the fourth quarter of 2023. Griffin more than quadrupled Citadel's stake in Terry's, buying 9.34 million shares. The hedge fund's position in the company was worth $334.8 million at the end of the fourth quarter.

Prior to this large increase, Citadel had been buying Terry's stock in a series of large purchases. Griffin also bought shares of the drugmaker in the first three quarters of 2023.

Why does Griffin like Terry?

As far as I know, Griffin has not yet commented on Citadel's massive purchase of Terry. However, we can make a good guess as to why he likes the stock.

First and foremost, Terry's valuation is attractive. Over the past 12 months, T煇 shares have plummeted 351 TP3T, and 551 TP3T since the beginning of 2022, and are currently trading at less than 12.2 times forward earnings. By comparisonStandard & Poor's 500 The forward earnings multiple of the Index is close to 20.9.

Another upside to Terrific's plummeting stock price is that its dividend yield now stands at 6.31 TP3T, which is near its highest level in more than a decade. Griffin knows that Terrific doesn't need a huge increase in its share price to realize an aggregate market-beating return on such a generous dividend yield.

Griffin also realized that investing is like playing chess: to be successful, you have to make multiple moves in advance. Terry's situation seemed bleak. Sales of its COVID-19 product continue to be sluggish, and the company is facing patent expirations on several of its top-selling drugs in the next few years. However, Terry's prospects should improve considerably in the future.

The large drug company expects that new product launches by mid-2024 and new indications for existing products will generate an additional $20 billion in annual revenues by 2030, an amount that would more than offset the negative impact of patent expiration. This amount would more than offset the expected negative impact of patent expiration. Terry also forecasts that by 2030, business development deals will generate another $25 billion in annual revenues.

Should you buy this high-yield dividend stock?

Is Terry Reilly a good choice for investors who are not billionaire hedge fund managers? I think the answer is "yes" - at least for some.

Growth investors may not find Terry's attractive. Even with new product launches and business development deals, the drugmaker's growth prospects aren't as strong as many other stocks on the market.

On the other hand, Terry's may be an ideal choice for income and value investors. There is no doubt that the stock pays a very nice dividend and is valued relatively low. I think Terrific will bring solid aggregate returns to the patient investor.

Should you invest $1,000 in Terry now?

Consider the following before buying Terry's stock:

Motley Fool Stock AdvisorThe analyst team has just named what they believe to be the best value for investors.10Only one stock, ......煇, was not included. The 10 stocks that made the list have the potential to generate huge returns over the next few years.

Stock AdvisorIt provides investors with an easy-to-understand blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. Since 2002, StockAdvisorThe service has more than doubled the return on the S&P 500 Index.

View 10 stocks only

*Stock Advisory Rates as of April 8, 2024

Keith Speights owns shares of Terry's. The Motley Fool has a position in Terry's and recommends Terry's. The Motley Fool has a disclosure policy.

Billionaire Ken Griffin made a killing on this high-yield stock. originally posted by Motley Fool.