Merck & Co. (NYSE: MRK) is one of just 30 companies that make up the Dow Jones Industrial Average. All 30 are mature, healthy, multinational brands that have performed extremely well over time. Taken together, they form a bellwether for the overall health of the stock market in the United States. The Dow as a whole has done well this year, but Merck is significantly outperforming the rest, and billionaires are taking notice. Should you?

What's New?

Merck is best known for its breakthrough cancer immunotherapy drug, Keytruda. The drug is considered the gold standard for first-line treatment of non-small cell lung cancer. On the back of Keytruda, Merck’s stock has climbed more than 16% year-to-date. This is especially impressive when compared to the slow growth rates of most Dow stocks. The company also pays a healthy dividend, with a current yield of 2.45%.

The company is expected to see top-line financial growth of about 14.7% for both 2024 and 2025. Coupled with the high margins that all cancer drugs have, Merck’s operating margins are also expected to rise. Billionaires are buying Merck at a steady clip, but does it make sense for the average retail investor?

Is This Sustainable?

The primary concern is sustainability. Keytruda’s patent expires in 2028, which will allow other companies to manufacture generic versions, presumably at a lower cost to consumers. In addition, oncology is a rapidly moving field with lots of companies working on newer and better therapeutics. It may only be a matter of time before some other drug is released that renders Keytruda largely obsolete.

Merck does have a strong profile of other pharmaceuticals, as well as additional drugs in the pipeline. But so far none have caught fire in quite the same way as Keytruda. To ensure sustainable long-term growth, Merck will need to continue investing in research and development, and have a bit of luck along the way.

Merck could prove to be a smart buy for retail investors. But make sure you do your due diligence. Get to know the company and its full line of products before making your decision. Don’t hop on board solely because the billionaires are buying.

Lisa Fritscher does not have positions in this company. Stocks.News has positions in MRK.