With the dog days of summer upon us, and the market starting to really slow down, some Wall Street firms are making the last changes for the third quarter recommendations to institutional and high net worth clients. In a new report, UBS made changes in the firm’s Equity Focus list and updated other positions.

The UBS Equity Focus list employs what they call the firm’s house view, fundamentals, technicals, thematics and quantitative work to determine the stocks that are put into the portfolio. Changes are made on a regular basis as market action and pricing dictates.

McKesson Corp. (NYSE: MCK) is removed from the UBS list this month. After an outstanding start to the year, the stock started to roll over in May. The UBS team cites a deceleration in generic drug pricing in the second quarter and the company’s uncertainty about pricing in the near term as the main reason for their concern over the growth prospects for the company. Shares closed Monday at $223.48.

A top new health care company is added into the portfolio, and we also review the other three health care stocks that are in the Equity Focus list.

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Centene Corp. (NYSE: CNC) is added to the list and posted very strong second-quarter earnings for shareholders. The company is a leading multiline health care enterprise that provides programs and services to government sponsored health care programs, focusing on underinsured and uninsured individuals. The UBS team sees the stock as a pure-play Medicaid managed care organization with a solid growth outlook driven by geographic expansion, health care reform and managed care penetration of Medicaid. The analysts like the stock despite the solid move this year.

The UBS price target for the stock is $90. The Thomson/First Call consensus target is $93.22. Shares closed most recently at $70.97.
Allergan PLC (NYSE: AGN) has been a strong portfolio holding for the Equity Focus list. The company recently made a huge splash when it sold its generics portfolio to Teva for a whopping $40.5 billion. Allergan markets a portfolio of best-in-class products that provide valuable treatments for the central nervous system, eye care, medical aesthetics, gastroenterology, women’s health, urology, cardiovascular and anti-infective therapeutic categories, and it operates the world’s third-largest global generics business. Allergan is an industry leader in research and development, with one of the broadest development pipelines in the pharmaceutical industry and a leading position in the submission of generic product applications globally.

The UBS price target is $365, and the consensus target is $362.59. The stock closed Monday at $334.92.

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Medtronic PLC (NYSE: MDT) is now based in Ireland after the gigantic combination with Covidien, and many on Wall Street see this historical merger, one of the largest in the medtech industry, as a momentous event, leading to the creation of a unique company that combines the extensive and innovative abilities of both Medtronic and Covidien. The combined company, with officially joint forces of over 85,000 employees present in more than 160 countries and annual revenues of $27.4 billion in 2014, will now expedite Medtronic’s three fundamental strategies of therapy innovation, globalization and economic value.

Medtronic investors are paid a 1.95% dividend. The UBS price target is $90, the consensus target is lower at $87.03. Shares closed Monday at $77.98.

Merck & Co. Inc. (NYSE: MRK) remains a leading health care company that is on the focus lists of many of the top firms we cover. Its numerous prescription medicines, vaccines, biologic therapies and consumer care and animal health products are provided to customers in more than 140 countries. Merck is the world’s fourth-biggest drugmaker by revenue and boosted its annual profit forecast after the company beat first-quarter earnings and sales estimates, fueled by higher demand for vaccines and diabetes treatments.

Merck shareholders are paid a solid 3.05% dividend. The UBS price target is $68, and the consensus is posted at $65.47. Shares closed Monday at $59.05.

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The UBS portfolio managers have done an outstanding job of combining growth with relative value. While they are slightly overweight technology, the balance in the portfolio is what has worked well over the years for clients.

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