Very quietly, while momentum stocks zoom up and down, one sector has made an almost stealth like move and is leading the S&P 500 so far this year. With the exception of utilities, health care is the only sector that is positive so far in 2014. Despite the rocky beginning of the Affordable Care Act, the market has long since priced in any dislocation as a result of reimbursement or changes in government policy. With geopolitical worries around the globe, investors may want to take a strong look at the top stocks to buy.
Merrill Lynch likes the sector and has made no secret that they think that it can continue to outperform for the balance of 2014. It makes good sense for investors who are looking to put money to work but are alarmed at some of the hotspots around the world causing concern. As a bonus, some health care stocks pay very solid and consistent dividend, which really can help add to total return.
Here are some of the top health care names to buy now according to Merrill Lynch.
AbbVie Inc. (NYSE: ABBV) is a top pharmaceutical name to buy. The company has thrown its hat in the ring in the race of oral interferon-free combination therapies for hepatitis C. The company has finished up its phase III clinical-trial program for its all-oral hepatitis C drug cocktail. There were six clinical trials in total, testing the drugs in different patient populations, in many cases with and without generic ribavirin. AbbVie’s drugs only have to be taken for 12 weeks in most cases and do not require peginterferon. Investors are paid a very solid 3.3% dividend. The Merrill Lynch price target for this top name is $58. The Thomson/First Call estimate is a $54.14. AbbVie closed Monday at $50.09.
Allergan Inc. (NYSE: AGN) is on the Merrill Lynch US 1 list in the health care sector. The company reported solid earnings, and a host of Wall Street firms lifted their ratings on the stock. The company benefits from the strongest balance sheet among its peers and a stable revenue base from some established drugs. The Merrill Lynch team thinks investors should see double-digit annual growth through 2018 from a couple of key products: Botox injections and the eye treatment Restasis. Investors are paid a small 0.2% dividend. The Merrill Lynch price target is $132. The consensus target is $130.10. The stock closed Monday at $126.32.
Biogen Idec Inc. (NASDAQ: BIIB) remains the top name in class and is an industry powerhouse. It is also another top name on the Merrill Lynch US 1 list. The research team points out that trading at just 20 times 2015 earnings, the stock is not overvalued. They also feel that it is a mega-cap biotech that can also beat this year’s earnings expectations. With an incredible portfolio and pipeline, Biogen Idec is a top portfolio holding for many mutual funds and hedge funds. The Merrill Lynch price target is $367, and the consensus target is $335.64. Shares closed Monday at $338.28.
Gilead Sciences Inc. (NASDAQ: GILD) is huge favorite at Merrill Lynch, and it is at the top of the Buy lists at most of the Wall Street firms that we cover. Following a very successful hepatitis C drug Sovaldi launch in January, the company continues to build a very strong and impressive oncology pipeline. The company also continues to innovate in the HIV arena, which grew 11% in 2013. The Merrill Lynch price target is $118. The consensus target is $100.17. The stock closed Monday at $81.45.
Eli Lilly & Co. (NYSE: LLY) is a top drug stock to buy on Wall Street and at Merrill Lynch. Many analysts see a number of strong catalysts for the stock for the rest of 2014. While some have overfocused on patent expiration and enthusiasm has been muted. Firms like Merrill Lynch that are bullish on the company see increased share buybacks as a strong support for the stock. Investors are paid a very solid 3.3% dividend. The Merrill Lynch price target is $67, and the consensus is at $57.35. Shares ended Monday at $59.03.
Pfizer Inc. (NYSE: PFE) is expected to deliver solid results in all metrics for 2014. It is widely expected that Pfizer will soon separate its branded and generic divisions internally, with the latter prone to a spin-off or sale. An outright sale of Pfizer’s generics business would be the most shareholder-friendly move. The segment, which generated more than $10 billion in sales last year, could theoretically fetch at least twice that value on the open market if a buyer could be found. Investors are paid a 3.2% dividend. Merrill Lynch has a $36 price target for the stock. The consensus price objective is $33.69, and Pfizer closed Monday at $31.98.
Stryker Corp. (NYSE: SYK) is a top medical technology name to buy at Merrill Lynch. With the acquisition of Trauson about a year ago, Stryker has shown the commitment to expand its business in the lower-priced segment and emerging markets. Sales in these regions have grown from 6% of total in 2012 to 7% in 2013, and they are expected to grow further to 8% in 2014, with the aim to get to double digits in the future. Further acquisitions will continue to be the main driver for growth. The company has also committed $700 million for the repurchase of its stock. Investors are paid a 1.50% dividend. The Merrill Lynch price target is $87, and the consensus is at $84.77. Stryker closed Monday at $79.90.
It just takes one geopolitical generated sell-off to get investors worried about the market. While many are optimistic the situations in Ukraine and in South America can be resolved, more volatility will continue until they are. With an S&P leading return, and far less susceptibility to broad market downturns, a good position in health care stocks makes solid logic for the near- and long-term investor.