It is a nice change sometimes when the prognosticators on Wall Street, who tend to follow each other’s lead, are not only right, but investors come out on top. Almost every major analyst firm that we cover has been very positive on technology and health care for this year, as the sectors’ leaderships pretty much has carried over from 2014.
A new research report from the technical team at RBC sees the trend continuing for the two sectors. They feel that a dramatic decline in bullish sentiment overall could allow for higher equity prices. The analysts cited Bristol-Myers Squibb Co. (NYSE: BMY), Eli Lilly & Co. (NYSE: LLY), Mylan N.V. (NYSE: MYL) and Perrigo Co. PLC (NYSE: PRGO) as stocks that may continue to show sector leadership.
This top large cap pharmaceutical stock is preferred at many Wall Street firms. In late December, the U.S. Food and Drug Administration (FDA) granted accelerated approval to Opdivo (nivolumab), a new treatment for patients with unresectable (cannot be removed by surgery) or metastatic (advanced) melanoma who no longer respond to other drugs. Many analysts are bullish on the drug and look for more updates and launch information to be forthcoming soon. With a host of additional pipeline candidates, the stock makes good sense at current levels.
Bristol-Myers investors are paid a 2.2% dividend. The Thomson/First Call consensus price target is $65.04, but shares closed trading Friday higher than that at $67.76.
Eli Lilly has faced some of the more negative stock coverage from Wall Street, and some analysts may have over-focused on patent expirations on key products, which has kept enthusiasm muted on the stock.
Eli Lilly and partner Boehringer Ingelheim recently received FDA approval for Glyxambi (Jardiance/Tradjenta) tablets for use as an adjunct to diet and exercise to improve glycemic control in adults with Type II diabetes. The FDA approval of Glyxambi helps to make up for the loss of revenues from the genericization of drugs like Cymbalta and Evista, which hurt fourth-quarter earnings.
Investors are paid a 2.65% dividend. The consensus price target is $75.18, but shares closed Friday at $76.12, up almost 2.5% on the day.
This global pharmaceutical company is committed to setting new standards in health care. The company offers a growing portfolio of around 1,400 generic pharmaceuticals and several brand medications. In addition, Mylan offers a wide range of antiretroviral therapies, upon which approximately 40% of HIV/AIDS patients in developing countries depend.
The company also operates one of the largest active pharmaceutical ingredient manufacturers and currently market products in about 145 countries and territories.
The consensus price target is posted at $61.47. Yet again, the stock closed above that level on Friday, at $63.06, which was down 1.38% on the day.
Perrigo develops, manufactures and distributes over-the-counter and generic prescription pharmaceuticals, nutritional products and active pharmaceutical ingredients, and it receives royalties from multiple sclerosis drug Tysabri.
Perrigo is the world’s largest manufacturer of over-the-counter healthcare products for the store brand market and an industry leader in pharmaceutical technologies. Numerous Wall Street analysts feel that company remains well positioned in store brands and in its generic niche. The earnings model most analysts are using assumes monetization of the Tysabri royalty stream at the end of FY15 (which may or may not happen).
Perrigo investors receive a tiny 0.3% dividend. The consensus price target is $170.07. Shares closed Friday at $172.87 apiece.
The RBC team has found four pharmaceutical leaders that have earnings power and a strong technical strength. These are the kinds of stocks investors can buy and hold in long-term growth portfolios with reasonable safety.