Forget the Synairgen share price! Here are my top 2 pharma stocks to buy right now

Jonathan Smith thinks the ship may have sailed on the Synairgen share price, and so would look to invest in AstraZeneca and GlaxoSmithKline instead.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Yesterday was quite a day for investors involved in Synairgen (LSE: SNG). The Synairgen share price rocketed 420% over the course of one day! This was mostly down to positive results surrounding a potential Covid-19 treatment. The trial undertaken showed that those given the treatment had a 79% better chance of recovery than those who’d taken a placebo instead. Even though I applaud this success, as an investor there are several reasons why I would actually invest elsewhere in top pharma stocks, instead of in Synairgen.

Market efficiency

Without trying to be boring, there’s a economic theory called efficient market hypothesis. In short, one of the points it makes is that the stock market perfectly takes on new information and prices it into the stock over a very short period. After this, the share price completely reflects any publicly available information about the stock. From that point of view, the huge rally yesterday was the market pricing in the success of the treatment. So there could be very limited further upside in the Synairgen share price.

This would make me look towards a stock such as AstraZeneca instead. The vaccine under development there (AZD1222) is still going through trials, but it looks promising. So if I was an investor looking to profit from a successful vaccine or treatment announcement and subsequent production, I’d look to invest here instead.

Track records

If we’re being honest, most of us hadn’t heard of Synairgen at the start of this year. Sadly, the fate of the firm after the rally of yesterday very much depends on the treatment. If it doesn’t deliver, then investors could be in for a tough long haul. That’s why I tend to stay away from small-cap, AIM listed firms.

So instead of investing in that share price, I’d look to an established top pharma stock to buy now instead. For example, take GlaxoSmithKline. The FTSE 100 stalwart has a market capitalisation of over £82bn. Synairgen has a market capitalisation of £282mn. As that’s sinking in, I’ll keep going. GSK directly invested in a firm called CureVac earlier this year, so would stand to gain from any vaccine made there. Yet even without a vaccine, GSK is a profitable firm that investors don’t have to worry about being a flash-in-the-pan. Also, don’t forget that GSK is still paying out a dividend to investors.

Synairgen share price: better alternatives

If you did manage to invest in Synairgen before the announcement, or even during the course of the day, you likely reaped huge rewards. But for those looking to buy now, ask yourself why. Just having a fear of missing out is not a good enough reason to invest in a stock like this. Rather, take a step back and look at it objectively. If you can’t back up the reasons why you’d invest in the Synairgen share price now, then I’d suggest looking at other firms instead. AstraZeneca and GSK are both top pharma stocks that get you similar exposure, but with much lower risk. That is where I’d be looking to target right now.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

jonathansmith1 has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

After it crashed 25%, should I buy this former stock market darling in my Stocks and Shares ISA?

Harvey Jones has a big hole in his Stocks and Shares ISA that he is keen to fill. Should he…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »