Jefferies likes big pharma
Investors can still find some compelling valuations among large-cap drug companies even as major stock indices hit new highs.
With the markets making new highs seemingly every day, it is understandable that investors may be finding it harder and harder to find stocks that do not appear overvalued or, at a minimum, overbought.
One sector that can be considered defensive while still having solid growth potential is pharmaceuticals. In a just-released report, the analysts at Jefferies find some compelling valuations still available for investors in pharmaceutical stocks.
Citing very attractive stock valuations, despite the dramatic advance of the markets since the low last November, the Jefferies team list of stocks to buy is dominated by the large cap major pharmaceutical companies. These stocks may prove to be solid investments for investors, given their liquidity and dividends. The list of pharmaceutical stocks to buy includes these companies.
AbbVie Inc. (ABBV) is the top pick on the Jefferies list. The analysts raise their price target from $45 to $50. The Thomson/First Call estimate for the stock is quite a bit lower at $37.50. AbbVie pays shareholders a 3.80% dividend.
Abbott Laboratories (ABT) has earned a spot on the list. It is trading at less than 10 time earnings, and Jefferies raises its price target to $42 from $40. The Wall St. consensus estimate is $35.50. Investors receive a small 1.50% dividend.
Bristol-Myers Squibb Co. (BMY) is a stock to buy. Due to the expanding profit margins and a quality pipeline, Jefferies ups its price target to $45 from $41. The consensus target for the stock is $36.25. Investors receive a 3.40% dividend.
Pfizer Inc. is another large cap name on the list. It recently received a breakthrough designation from the FDA for an experimental breast cancer pill. The Jefferies price target for Pfizer jumps to $33 from $31, while the consensus target is $31. Shareholders are paid a 3.30% dividend.
Zoetis Inc. (ZTS) wraps up the Jefferies list of pharmaceutical stocks to buy. Its recent IPO that has performed extremely well. The price target on the stock is held steady at $40. The consensus price target is $38. Investors receive a tiny 0.80% dividend.
For investors holding other names and perhaps looking to switch, the Jefferies least-preferred stocks in the space are Eli Lilly & Co. (LLY) and GlaxoSmithkline PLC (GSK) on a valuation basis, and Merck & Co. Inc., due to its poor run in the research and development of new drugs.
While expecting solid earnings and forward guidance from their stocks to buy, the Jefferies team does not stray very far from their large cap bias. This makes good sense for investors looking to enter the sector because, in theory, it avoids the risks in smaller drug or biotech players. As we have advised recently, due to such a strong move in the markets, readers looking to buy these names may want buy half positions and look for a sell off to add the additional stock at a lower price.
More from 24/7 Wall St.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
The company is scrambling to protect its equities arm, which could face declining volume and revenue as competitors close the gap.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.