This one comes in from Stansberry and Associates, as an ad for Porter Stansberry’s Investment Advisory — if you subscribe, they’ll send you the special report: “Part D Compensation”— Monthly Checks for the Next 9 Years.

Now, Stansberry and his folks love to come up with new terms and phrases to describe the investment strategies they’re recommending –whether that’s the 801-K plan or the USG-4 Stock Tipsheet … and the Part D Compensation plan is really not too different.

Part D exists, of course, but — as they do clearly state in the ad — it’s a part of Medicare that now covers prescription drugs. So calling this “Part D Compensation” is just a cute way of saying that they think this Medicare program is going to help pharmaceutical companies make money, and if they make money then their stockholders will make money. The “monthly checks” part is just the fact that most big pharmaceutical companies have pretty decent dividends, and while they pay them quarterly the fact that there are staggered reporting periods among the various companies means you’ve got a good chance of getting a monthly dividend check of some kind.

So the “Part D Compensation Plan” is just to buy four pharmaceutical stocks, and watch your “550% … or more” returns pile up over nine years (that’s Part D’s authorized lifespan, so far) … but you could probably figure out that much on your own — the letter didn’t seem particularly designed to mislead, and “Part D” is not a totally invented term. The real question is, what are the four pharmaceutical companies Stansberry is talking about here … that’s the question for me, at least — the question for you will be, “are they worth my money?”

He provides a few hints to get us on our way, a kind gesture toward those among us who prefer not to pay and just want to find the name of an investment idea. So let’s take a look, shall we?

“Part D Compensation” Company #1 clues:

15 years of annual dividend increases
“Makes 8 of the top 20 drugs used by seniors (source: Families USA 2006 Study)”
Pay dividends in February, May, August, and November.
Dividends total about $7 billion.

“A recent Business Week article said money from the new “Part D” Plan now accounts for about 20% of this company’s U.S. sales. By 2008, “Part D” will account for more than 40% of U.S. sales.”

Provided shareholders with 438% returns “During a recent 5-year stretch.”

That enough for you? The Gumshoe’s Cognitationizer takes a brief spin around the block and returns to answer that this is …

Pfizer (PFE)

If you don’t know that Pfizer has had a rough couple of years, you haven’t been paying attention, the shares have been bouncing up and down around $25 since 2005’s significant fall from the mid-30s, and it’s no longer considered a growth darling. But maybe it should be?

They do have 8 of the top 20 drugs for seniors — if you count different dosages as different drugs. That would be Aricept, Celebrex, Lipitor (2 dosages), Norvasc (2 dosages), Xalatan, and Zoloft. And they do pay their dividends on that schedule — though with their huge reliance on some drugs that will come off patent in the relatively near future, including especially Lipitor, which accounts for the lion’s (and the witch’s, and the wardrobe’s) share of their sales, there’s some fear that maybe that dividend won’t rise forever.

It does seem remarkable to me that you can buy Pfizer, the poster child for solid pharma growth for years, at a near-5% yield and a PE near 10, but investors are terrified of what happens when Teva or someone like that starts churning out generic Lipitor. Though they do have $14 billion in net cash on their books (seriously — with a B), so perhaps they’ll be able to develop or buy some new high margin drugs.

“Part D Compensation” Company #2

“The company makes 2 of the 10 best-selling prescription drugs for seniors.”

Ten dividend raises in ten years (total div. payout of $29.95 over that time).

“Money Magazine recently reported [that] this company is ‘benefiting from an increase in prescription volumes, stemming from increased coverage from the new Medicare Plan D, implemented on Jan. 1.'”

464% gains “over a recent five year stretch” — notice how they’re not saying “the last five years” for any of these?

Last dividend payout was June 6.

So … again not too tough, the Cognitationizer doesn’t even have to leave the house for this one — this second Part D company is …

Merck (MRK)

And if you didn’t hear about their problems you’re REALLY not paying attention — they’ll probably be fighting off lawsuits over Vioxx until my granchildren are old and gray. And my oldest child is not yet 4.

That said, they sure did have a nice recovery after they started winning a few of those lawsuits in the last year or so, and they did come out with the cervical cancer vaccine and they have some other stuff in the pipeline that investors seem to like. The dividend is much lower than Pfizer’s, and the valuation significantly cheaper — but they don’t have all their eggs in the expring patent basket for Lipitor like Pfizer is. Like most all of the big pharmas Merck has a challenge to keep their pipeline robust enough to continue churning out billion dollar drugs, and I can’t say that I have any idea how they’re doing on that front. Still, unlike many Pharmas this has been a Wall Street darling for a couple years.

“Part D Compensation” Company #3

Makes a best-selling blood pressure drug

“Plus, the company makes some of the most popular over-the-counter antacid, decongestant, and pain-relief medications.”

Second-biggest generic manufacturer in the world.

Raise dividend five times in seven years (100% gains during that time).

One annual dividend, payable in February.

This one took a few moments in the Thinkolator (wore out the Cognitationizer — don’t usually have to find four stocks in one email) … but I do believe we’ve got it. This company is …

Novartis (NVS)

The big swiss drugmaker is indeed the second-biggest generics company, too (depending on who you ask), thanks to their Sandoz division that has bought up a bunch of manufacturers over the years. They also sell Diovan, their biggest current drug, which is indeed a blood pressure medication.

They’ve also got plenty of over the counter drugs, including Gas-X, Theraflu, Lamisil, Maalox and lots of other stuff I’ve taken or heard of.

This one was pegged as a top drug stock for 2007 by a lot of analysts over the winter, since they were expecting approvals for some potentially big drugs and their biggest drug, Diovan, won’t expire for at least five years or so. That’s not how the ticker has worked so far, they’re down a few bucks from where the shares stood in January, but I don’t know of any of the big “issues” for Novartis the way I do for Merck and Pfizer (that’s not saying much — I’ve never really done much research on NVS). The yield is pretty low, and the valuation is comparable to Merck’s (if you believe the analyst numbers for next year) at a forward PE of around 15.

Honestly, I haven’t looked at big pharma companies in a long time, and I’m actually getting a little tempted here — some skeletons in a few of these closets, but man oh man a few of these fellas look downright cheap!

“Part D Compensation” Company #4

This one has increased dividends annually for 44 years

Got it yet? There aren’t many of those … not even many companies that have been around that long, in all honesty.

But to be sporting, let’s look at the other clues:

“It makes many of the best-selling prescription and brand-name medications in America”

“15 different products that bring in more than $1 billion a year”

“If there’s one “Part D Compensation” company you want to buy and hold for the next nine years and beyond, this is it” Porter here is talking about

Johnson and Johnson (JNJ)

Man, it would be nice if these were my Johnson ancestors. I’d even take the SC Johnson folks. But no, just some poor Swedish farmers … curses.

But really, do you need me to say anything about J&J? They have raised the dividend for 44 straight years, which is pretty remarkable (almost as good as P&G’s 50 years), and they do have a solid OTC and prescription business, though folks aren’t all that optimistic about their pipeline at the moment. If you like JNJ, I don’t know that it’s ever been this cheap, at least in my memory, at a forward PE of 14, and the yield is a nothing-to-sneeze-at 2.7%

So … these are the four “Part D Compensation Plan” stocks from Porter Stansberry … they all look fairly compelling on the face of it, but since analysts and investors are valuing all of these with a keen eye on potential blockbusters in the pipeline, and current blockbusters about to lose patent protection, it would probably be a fine idea to look into those details on all of them before thinking about investing.

It used to be that big pharma stocks were the best reliable growth companies you could buy … if that’s still true in the long run, and we’re all worrying about the wrong things, then these might all be screaming bargains right now (big “If,” though). I don’t ever remember forcing myself to think about big pharma as a contrarian play, but that might be what we’re starting to look at here.

Let us know what you think of these big boys … and if you’re an expert in all these confusing pipelines or patent expirations, or understand what any of these strange chemical names mean, by all means, share!