For years, one of the most dependable sectors, especially for more conservative investors, was health care, which includes the top pharmaceutical and biotech stocks. However, over the past five years, the sector, while delivering positive total returns, has massively underperformed some of the more popular sectors, like technology. In fact, right now, health care trades near the biggest valuation discount to the S&P 500 since 1990.
With 2021 winding down and 2022 almost upon us, the decade-long (and then some) expansion in the stock market faces a period of heightened volatility and risk. The health care sector could benefit from a shift toward more defensive sectors. This group of health care stocks has strong balance sheets, attractive dividend yields and improved cost structures.
This 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 happen eventually with anti-inflammatory therapy Humira, which has some of the largest sales for a drug ever recorded. The company was concerned, so in June of 2019 it announced that it has agreed to pay $63 billion for rival drugmaker Allergan, the latest merger in an industry in which some of the biggest companies have been willing to pay a high price to resolve questions about their future growth. The purchase officially closed in May of last year.
AbbVie may be nearing the limits of how far it can boost Humira’s price as cheaper competitors come to market, a problem Allergan is already grappling with as more alternatives to Botox emerge.
Shareholders receive a 4.81% dividend. SVB Leerink recently trimmed its $148 price target to $142, but the consensus price target for AbbVie stock is just $127.78. Shares closed trading on Wednesday at $117.35.