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.
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AbbVie
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.
Amgen
This biotech giant remains a top stock for investors to buy and a safer way to play the massive potential growth in biosimilars. Amgen Inc. (NASDAQ: AMGN) discovers, develops, manufactures and delivers human therapeutics worldwide. It focuses on inflammation, oncology/hematology, bone health, cardiovascular disease, nephrology and neuroscience.
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The company’s products include the following:
- Enbrel to treat plaque psoriasis, rheumatoid arthritis and psoriatic arthritis
- Neulasta reduces the chance of infection due a low white blood cell count in patients cancer
- Prolia to treat postmenopausal women with osteoporosis
- Xgeva for skeletal-related events prevention
- Otezla for the treatment of adult patients with plaque psoriasis, psoriatic arthritis and oral ulcers associated with Behcet’s disease
- Aranesp to treat a lower-than-normal number of red blood cells and anemia
- Kyprolis to treat patients with relapsed or refractory multiple myeloma
- Repatha, which reduces the risks of myocardial infarction, stroke and coronary revascularization
Amgen also markets Nplate, Vectibix, Mvasi, Parsabiv, Epogen, Kanjinti, Blincyto, Aimovig, Evenity, Amgevitatm, Sensipar/Mimpara, Neupogen, Imlygic, Corlanor and Avsola. The company’s five key marketed products are among the top-selling pharmaceutical products in the world, with the company having expected collective revenues of more than $25 billion in 2021.
Amgen stock investors receive a 3.42% dividend. BMO Capital Markets has a Wall Street high $301 price target. The consensus target is $244.81, and the final trade for Wednesday came in at $205.82.
Bristol-Myers Squibb
This top company remains a solid pharmaceutical stock to own long-term and the stock is offering an outstanding entry point after a tumble. Bristol Myers Squibb Co. (NYSE: BMY) discovers, develops, licenses, manufactures and markets pharmaceutical products worldwide in the hematology, oncology, cardiovascular and immunology therapeutic classes.
Its products include the following:
- Revlimid, an oral immunomodulatory drug for the treatment of multiple myeloma
- Opdivo for anti-cancer indications
- Eliquis, an oral inhibitor targeted at stroke prevention in adult patients with non-valvular atrial fibrillation, and the prevention and treatment of venous thromboembolic disorders
- Orencia for adult patients with active RA and prostate-specific antigen, as well as reducing signs and symptoms in pediatric patients with active polyarticular juvenile idiopathic arthritis.
- Sprycel for the treatment of Philadelphia chromosome-positive chronic myeloid leukemia
- Yervoy for the treatment of patients with unresectable or metastatic melanoma
- Abraxane, a protein-bound chemotherapy product
- Reblozyl for the treatment of anemia in adult patients with beta thalassemia
The company sells products to wholesalers, distributors, pharmacies, retailers, hospitals, clinics and government agencies. It has collaboration agreements with Pfizer, Otsuka Pharmaceutical, Ono Pharmaceutical, Nektar Therapeutics; AVEO Pharmaceuticals, Huyabio, DarwinHealth and Bolt Biotherapeutics.
Shareholders receive a 3.30% dividend. BofA Securities has a $78 price target on Bristol-Myers Squibb stock. The consensus target is $73.18, and shares closed most recently at $59.44.
Gilead Sciences
This stock is trading a very reasonable 9.53 times estimated 2021 earnings and has big-time upside potential. Gilead Sciences Inc. (NASDAQ: GILD) is a research-based biopharmaceutical company that discovers, develops and commercializes medicines in the areas of unmet medical need in the United States, Europe and elsewhere.
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The company provides Biktarvy, Genvoya, Descovy, Odefsey, Truvada, Complera/Eviplera, Stribild and Atripla products for the treatment of human immunodeficiency virus (HIV) infection; Veklury, an injection for intravenous use, for the treatment of coronavirus disease 2019; and Epclusa, Harvoni, Vosevi, Vemlidy and Viread for the treatment of liver diseases. It also offers Yescarta, Tecartus, Trodelvy and Zydelig products for the treatment of hematology, oncology and cell therapy patients.
In addition, Gilead provides Letairis, an oral formulation for the treatment of pulmonary arterial hypertension; Ranexa, an oral formulation for the treatment of chronic angina; and AmBisome, a liposomal formulation for the treatment of serious invasive fungal infections. Gilead Sciences has collaboration agreements with Arcus Biosciences, Pionyr, Tizona, Tango Therapeutics, Jounce Therapeutics, Galapagos, Janssen, Japan Tobacco, Gadeta, Bristol-Myers Squibb, Merck and Novo Nordisk.
The dividend yield is 4.21%. Oppenheimer has set the highest price objective on Wall Street. Its $100 target is well above the $75.86 consensus target. Gilead Sciences stock closed at $67.46 a share on Wednesday.
24/7 Wall St.Walgreens
This huge drugstore chain operator is a safe retail play for investors looking to add health care now. Walgreens Boots Alliance Inc. (NASDAQ: WBA) operates as a pharmacy-led health and beauty retail company. It operates through three segments.
The Retail Pharmacy USA segment sells prescription drugs and an assortment of retail products, including health, wellness, beauty, personal care, consumable, and general merchandise products through its retail drugstores. It also provides specialty pharmacy services and mail services; this segment operates nearly 10,000 retail stores under the Walgreens and Duane Reade brands in the United States; and six specialty pharmacies.
The Retail Pharmacy International segment sells prescription drugs; and health and wellness, beauty, personal care, and other consumer products through its pharmacy-led health and beauty stores and optical practices, as well as through boots.com and an integrated mobile application. This segment operated 4,428 retail stores under the Boots, Benavides, and Ahumada in the United Kingdom, Thailand, Norway, the Republic of Ireland, the Netherlands, Mexico, and Chile; and 550 optical practices, including 165 on a franchise basis.
The Pharmaceutical Wholesale segment engages in the wholesale and distribution of specialty and generic pharmaceuticals, health and beauty products, and home health care supplies and equipment, as well as provides related services to pharmacies and other health care providers.
Walgreens Boots Alliance stock investors receive a 4.00% dividend. Baird’s $68 price target compares with the $53.02 consensus target and Thursday’s closing price of $47.81 a share.
All these stocks have solid upside to the Wall Street price targets, and they all pay very dependable dividends. With even moderate appreciation in the shares prices of these top companies, investors should be looking at double-digit total return potential. In a market that is very long in the tooth, that makes a ton of sense now.
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