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Tickers in this Article: BMY, LLY
Let's tally up what's wrong with the economy right now: rising oil, credit crunch, loss of consumer confidence, recession and stock market correction. With everything that is going wrong, it's a little shocking to see some companies doing everything right. Pharmaceutical giants Bristol-Myers Squibb (NYSE:BMY) and Eli Lilly & Co. (NYSE:LLY) are two such companies.

These companies have made investing look easy: All investors had to do was buy these stocks, collect the dividend and not have to worry about depreciation of the stock value due to macro economic issues.

Bristol-Myers is No Squibb
The $42 billion drug company which discovers, develops, licenses, manufactures and distributes pharmaceuticals in such life saving categories as cardiovascular, oncology, psychiatry, and others has held up nicely during the past six months. The stock has traded in a range of $23.23 down to $19.57. Roughly a 15% range and is currently only down 7% from its six-month high noted earlier.

Fundamentally, the stock is expected to earn 19.6% more in the current fiscal year compare to its last fiscal year; it has beaten the analyst estimates three of the last four quarters that it has reported, and it is growing revenue at 7.6% this year. With a current forward price-to-earnings (P/E) ratio of 10.87, the stock is slightly undervalued when compared to the industry average of about 16. And the dividend looks great currently yielding almost 6%. (Read The Importance Of Dividends to learn more about this lucrative distribution of company profits.)

The company recently had trouble with a blood clotting drug, Apixaban, not clearing a late-stage trial but Bristol-Myers Squibb feels the drug will still become available to the public. In addition, the company recently made a bid for ImClone systems. The purchase of ImClone will further increase its drug pipeline if the $4.5 billion bid is accepted.

Eli Lilly's Label Lament
Eli Lilly & Co is also involved in the discovery, development, manufacturing and sale of pharmaceuticals. Currently the company is valued at about $53 billion. The stock has also fallen slightly lately but has traded within a range of $53.06-$45.61 over the past six months and is currently near $47.02. That's a loss of 11% from its highest point during the six month range.

Some of the decline in stock price has been related to the four deaths from a drug that it co-markets with Amylin called Byetta. The drug is used as a treatment for type 2 diabetes and the FDA is considering making the companies add more label warnings in addition to the warnings placed on the labels in 2007.

The stock has a nice dividend currently yielding 4%. In addition to the dividend, the company has quarterly revenue growth of about 11% year-over-year. Missing the last two quarters is worrisome, but if the company can beat next quarter, that should be a sign that the stock is able to move higher. With a low forward P/E ratio of 10.86, investors aren't ready to buy more shares until there is a sign of better growth numbers to come.

Bristol-Myers Squibb and Eli Lilly are two drug manufacturers that have held up nicely in a difficult market. They are both attractive longer term investments without much fear of loss of capital. Their dividend payouts are stable and have good yields. There are short-term drug missteps but both companies are working to improve their drug pipelines and are big enough to withstand the market volatility that has been seen over the past six months.

To learn more about this sector's risks and rewards, be sure to read The Ups And Downs Of Biotechnology.

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