Health and Healthcare

Big Pharmaceuticals Stocks May Be The Safest Place To Be Now

Lee Jackson

Published: June 15, 2018 10:07 am

Last Updated: January 11, 2020 10:18 pm

There is a laundry list of worries that are starting to jump on the plates of investors, not the least of which was confirmed by the Federal Reserve meeting this week, where it became pretty clear we will have a total of four rate increases in 2018 as opposed to three. Toss in the worries over the trade tariffs, which now look like they will be imposed in early July, and there are plenty of reasons to be
nervous.

Despite the potential for increased volatility, the good news is the economy is hitting on all cylinders, consumer spending is strong, and unemployment is at the lowest levels in years. One good move for investors may be to take profits in volatile momentum tech stocks and move to large cap pharmaceuticals. They have a degree of safety and very attractive valuations.

We screened the Jefferies global pharmaceutical coverage list for US companies and found four that look like solid picks for investors. All are rated Buy, and pay good dividends as well.

AbbVie
This stock is one of the top pharmaceutical stock picks across Wall Street. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories. The company develops and markets drugs in areas such as immunology, virology, renal disease, dyslipidemia, and neuroscience.

One of the biggest concerns with AbbVie is what might eventually happen with anti-inflammatory therapy Humira, which has some of the largest sales for a drug ever recorded. Last year the patent board instituted Coherus’ Inter Partes Review or IPR against the Humira ‘135 patent. The problem with Humira is that biosimilars and generics are itching to enter the market.

Shareholders are paid a solid 3.9% dividend. The Jefferies price target is $125, and the Wall Street consensus price target for the shares is set at $113.86. The stock is trading early Friday at $98.48.

Eli Lilly
This is another company with solid upside potential and a safer profile for investors. Eli Lilly and Company (NYSE: LLY) is a global healthcare company with numerous core products in a number of primary-care pharmaceutical markets. The company generates revenues from its pharmaceutical product and animal health segments.

The product portfolio includes Zyprexa (schizophrenia and bipolar disorder), Gemzar (pancreatic cancer), Evista (osteoporosis), Cymbalta (depression), Cialis (erectile dysfunction), Strattera (attention deficit hyperactivity disorder – ADHD), Erbitux (cancer) and Alimta (chemotherapy). Lilly also has a strong presence in the diabetes market.

Shareholders are paid a 2.65% dividend. The Jefferies price target is $97, and the consensus target on Wall Street is posted at $90.78. The shares are trading early Friday at $86.70.

Johnson & Johnson
With a diverse product base and a very popular and solid brand, this is among the most conservative big pharmaceutical plays. Johnson & Johnson (NYSE: JNJ) is one the top market cap stocks in the healthcare sector and will raise the dividend for shareholders this year for the 55th consecutive year. With everything from medical devices to over-the-counter (OTC) health items and prescription drugs, J&J remains one of the most diversified healthcare names on Wall Street.

The healthcare giant also has one of the most exciting pipelines of new drugs in the sector. That combined with the solid OTC product business makes the stock an outstanding holding for conservative accounts with a long term investment outlook. The company generates a little over half its sales in international markets that are expected see higher spending on healthcare over the next 10 years and beyond.

Shareholders are paid a solid 3.01% dividend. The Jefferies price target is set at $150, and the consensus price objective is posted at $145.10. The shares are trading at $122.60 early Friday.

Zoetis
This company is a big player in the veterinarian world. Zoetis Inc. (NYSE: ZTS) engages in the discovery, development, manufacture, and commercialization of animal health medicines and vaccines for livestock and companion animals in the United States and internationally. It offers anti-infectives that prevent, kill, or slow the growth of bacteria, fungi, or protozoa; vaccines, which are biological preparations to prevent diseases of the respiratory, gastrointestinal, and reproductive tracts or induce a specific immune response; and parasiticides that prevent or eliminate external and internal parasites, such as fleas, ticks, and worms.

The company also provides medicated feed additives that offer medicines to livestock; veterinarian solutions for anesthesia, pain management, and the diagnosis of diabetes; and other pharmaceutical products, including pain and sedation, oncology, antiemetic, allergy and dermatology, and reproductive products. In addition, it offers other product categories comprising nutritionals and agribusiness services, as well as products and services in complementary areas consisting of biodevices, diagnostics, and genetics.

Shareholders are paid a smaller 0.62% dividend. The Jefferies price target is set at $98, and the consensus is posted at $87.67. The shares are trading early Friday at $87.83.

These are four top pharmaceutical stocks to buy that could offer investors a smoother ride this summer if the markets get volatile or we have a big sell-off. All have long-term dependability for investors looking to lower their risk profile.

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