Pfizer: One Of The Next Big AI Winners

Summary:

• Kirk Spano thinks Pfizer is poised to be a major AI winner, especially in cancer treatment. Potentially making it easier to manage like AIDS.
• Selling cash secured puts on Pfizer can generate income and offer a lower entry point, minimizing downside risk.
• Private equity is shifting from fossil fuels to AI and renewable energy, signaling a broader market transition.
• Pfizer’s strong dividend and low downside risk make it a solid investment with a significant margin of safety.

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Why Kirk Spano sees Pfizer as one of the next big winners from AI and why he thinks investors should be selling cash secured puts. This is an excerpt from a recent episode.

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Transcript

Kirk Spano: I think Pfizer (NYSE:PFE) is one of the next big winners from AI. Will it take two or three years? Probably.

But I think that Pfizer is in that group of pharmaceutical companies with a ton of data, a ton of resources, and they’ve been investing heavily in AI.

One of the things that I saw, and I can’t remember the guy’s name, is he said that AI would cure a disease in the next few years. I think that’s probably true.

And I think that Pfizer, which is focused on cancer at this point, that’s where they’ve really been pouring money into. I think that cancer in the next decade or sooner, not later, but decade or sooner, cancer is going to become like AIDS in how we treat it.

Meaning, it doesn’t pass as easily, it doesn’t metastasize as easily, it’s easier to treat. I mean, at this point, people with AIDS, if they take their medicine, most of them can suppress it to the point where it’s actually hard to find in your system. We’re going to accomplish that with cancer.

I think Pfizer is on my short list of companies that might pull that off. And so that’s a stock at 25 and change, right around 25. If you sold a cash secured put $1 or $2 below today’s price, you’d probably make $1 or $2 in premium.

So let’s just say, it’s 25 today. I know that’s close. And you sold a $23 or $22.50, I don’t know which ones are out there, put, because I’m just buying the stock and then you collected $1.

That means you got $1 today, the equivalent of a 4% income against that cash that you have to hold on to in case you have to buy the stock at $22.50 or $23, whatever your strike price is, and you’re still going to buy it 10% cheaper.

Now let’s suppose Pfizer goes up between now and your option expiring, well, then the option just expires and that $1 in your pocket or $1.50 is in your pocket, whatever the numbers are.

Selling a cash secured put is a lot like setting a limit order below the current price and you’re getting paid to do it. If you use basic technical analysis, you don’t have to be able to do it from scratch. You just got to be able to read other people’s work.

Probably the easiest way to make money that I have found in 30 years, I’ve been doing it for 25 years and that is why my results are a little smoother, a little higher than the average bear out there.

I think that cash secured put selling is something that people should really use a lot. I think covered call selling is something they should use occasionally because you really do want to ride your winners.

You don’t want to handcuff your winners with a covered call. I mean, you don’t want to do that very often.

We bought Palantir (PLTR) below 10, rode it into the thirties and started writing covered calls way too early. I regretted it. I had to roll a couple out. But there’s a lot of stocks that we bought early because we forecast out further than a year, right? All the analysts are based on a year.

So I look at that two-, three-, four-, five-year window, say, okay, what opportunity are all these dumb analysts going to give me in the next year or so because they’re so focused on, oh, last quarter this and so next quarter that.

I don’t care. Just put your narrative out there, screw up the market. I’ll take advantage of you screwing up the market and I’ll buy things cheap the way a private equity firm would. And that is an overarching message that I give all the time.

Think like a private equity investor. They’re usually the smartest guys in the room, almost always.

When I was at the Hart Energy conference early this year, I talked to the CEO of Matador (MTDR) and a bunch of other companies and a bunch of private equity guys, and every single one of them, every single one of them, if you’re watching the show Landman, I forget what network it’s on, maybe Paramount. It’s about the Permian Basin and the Midland area and the oil boom. And every now and then, they actually kind of give a lesson about oil needs to be between this price and that price and blah, blah, blah. And this is the future. This is the past.

The private equity guys were telling me in May, look, the United States only has enough oil in the Lower 48 to expand production a couple of percent for a few more years. And then in the 2030s, our oil supply is going to turn over, which is why we either have to have EVs or much more efficient internal combustion engine vehicles.

Because sometime in the 2030s, if we’re not getting off of oil at least a little bit by then, we’re going to have really expensive oil from our buddies in the Middle East.

So, we got five to 10 years to make that transition. Well, the private equity guys are already planning it. They’re slowly cashing out of their fossil fuel investments, and they’re investing in other stuff, AI and solar energy and battery companies and just different things.

So take a look at the fourth industrial revolution. It’s telling you where everything’s going with AI and AR and VR. And go right down the list, blockchain. So if the private equity guys are slowly getting out of fossil fuel investments, right, they’re not rushing to the door, but they’re selectively selling. Well, okay, what does that tell you, you should do as an investor?

If that’s what the private equity guys are doing, if that’s how the options market is pricing things, that’s what grandpa said, right, follow the money. My grandpa told me when I was 20, 21 years old, you want to know how something works? Follow the money. Who’s getting paid? And what are they doing with that money that they get paid with? There you go. That’s your story.

Rena Sherbill: Getting back to the Pfizer example for a second, let’s say your narrative or your thesis doesn’t play out or there’s a kind of a wrench in their trajectory, what’s a risk to that strategy?

KS: That you sit there and collect a 5% dividend for an extra number of years. I mean, they don’t really have go to zero risk. I mean, they could chop around for a long time risk, but they don’t really have big downside risk and that’s what I look for.

That’s the whole point of Margin of Safety as Buffett describes it and adapts it from Benjamin Graham is get a low enough price, so that even if it doesn’t go up, it really doesn’t go down much.

So that’s where Pfizer is right now. And I’m featuring that one in my dividend service. I have a basic Margin of Safety service for $99 a year to try it on. Pfizer is going to be my first pick because I rebooted it for 2025.

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