When presidential candidate Hillary Clinton stirred the market this week with a campaign announcement on a proposed crackdown on drug pricing, and more regulations on the pharmaceutical industry, many of the top stocks took a big hit. In a new report, Merrill Lynch analysts say that Clinton’s rhetoric is just that, and would be very hard to enact.

Merrill Lynch points out that concerns are very overdone and reminds investors that the proposals are not new and have failed to gain momentum in the past when others have taken a similar path. They also note that Clinton is not yet the candidate for the Democrats and is a long way from the presidency. Lastly, the analysts point to the fact that the Republicans hold a majority in both the House and the Senate and are unlikely to support any of these issues.

One positive from the hammering the stocks have taken is the Merrill Lynch analysts say investors have been given a golden opportunity to buy the top companies at much better prices. We highlight four Buy-rated stocks from the Merrill Lynch research universe.

Abbott Laboratories

This top pharmaceutical stock has very solid growth potential. Abbott Laboratories (NYSE: ABT) is a leading diversified global health care company that develops, manufactures and markets branded generics, medical devices, nutritional products and diagnostic solutions. It recently agreed to acquire the equity in Minnesota-based Tendyne that it does not already own for $250 million plus future payments tied to regulatory milestones. Merrill Lynch likes the purchase and the way the company is putting its substantial balance sheet to work.

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The company also offers a diversified large cap play as earnings are split between five well-positioned business segments: Nutritionals (31% of revenues), Vascular (13%), Generic Pharmaceuticals (20%), Diagnostics (25.5%) and Diabetes (10.5%).

Abbot Labs investors are paid a 2.27% dividend. The Merrill Lynch price target for the stock is $53, and the Thomson/First Call consensus target is $54.09. Shares closed Wednesday at $42.20.
Eli Lilly

This stock checks in high on the global pharmaceutical lists at many top Wall Street firms and is on Merrill Lynch’s US1 list. Eli Lilly and Co. (NYSE: LLY) is still somewhat surprisingly out of consensus with portfolio managers at mutual fund and hedge funds. It also has more Neutral ratings than Buy ratings on Wall Street.

The company reported second-quarter earnings that were above the consensus estimates. But revenues declined 4%, reflecting generic competition for Cymbalta and Evista in the United States, as well as some negative currency movement. However, revenues still surpassed consensus expectations.

The company’s new cancer drug Cyramza won FDA approval for label expansion recently. It treats patients suffering from metastatic colorectal cancer. This was the fourth Cyramza approval in a one-year period; it already has approval to treat advanced or metastatic gastric or gastroesophageal junction adenocarcinoma and metastatic non-small cell lung cancer. Cyramza has so far generated sales of $67.5 million.

The Merrill Lynch team and other analysts on Wall Street love the company’s product pipeline and point to Solanezumab for Alzheimer’s Phase 3 data, which had positive clinical results reported in late July, and Jardiance, the company’s drug for diabetes, CV data, which recently posted very positive clinical results. The recent Phase 3 data on Evacetrapib was very solid as well.

Shareholders are paid a solid 2.28% dividend. The Merrill Lynch price target is $108, and the consensus target for the stock is $95.39. Shares closed Wednesday at $86.69.

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Merck

This leading health care stock is on the focus lists of many of the top firms we cover. Merck & Co. Inc. (NYSE: MRK) sells numerous prescription medicines, vaccines, biologic therapies and consumer care and animal health products 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 reported solid first-quarter results. It followed that up by beating second-quarter earnings estimates, though revenue for the quarter matched the consensus estimate.

The pharmaceutical giant recently announced very encouraging data from two pivotal Phase 3 clinical studies for its investigational antitoxin bezlotoxumab for prevention of recurrence of clostridium difficile (C. difficile) infection. Data from the Phase 3 studies dubbed MODIFY I and MODIFY II evaluated the use of bezlotoxumab alone or in combination with actoxumab, in comparison to placebo for the prevention of recurrent C. difficile infection in patients on standard of care antibiotics for a primary or recurrent C. difficile infection. Both the studies met their primary efficacy endpoints.

Merck shareholders are paid a very solid 3.51% dividend. The Merrill Lynch price target is $68, and the consensus target is $63.20. Shares closed Wednesday at $51.03.

Pfizer

This stock could be offering investors the best value at current trading levels. Pfizer Inc. (NYSE: PFE) rocked Wall Street this year by announcing a gigantic $15.2 billion purchase of Hospira, a top provider of sterile injectable drugs infusion technologies and biosimilars, which are subsequent versions of drugs with expired patents.

In addition, Pfizer’s drug Ibrance was approved for advanced breast cancer by U.S. regulators more than two months ahead of schedule, letting the drugmaker proceed with one of its most promising new blockbusters, a turn of events that Wall Street likes. With a strong pipeline and the fact that Pfizer is the world’s largest drug manufacturer by sales value, many analysts feel the company can generate higher long-term revenues through the accelerated growth of its new drugs over the next five years, with Ibrance leading the way.

Pfizer investors are paid a tidy 3.43% dividend. The Merrill Lynch price target is $36. The consensus target is higher at $38.56. Pfizer closed Wednesday at $32.62.

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The key reason for owning top pharmaceuticals is twofold: outstanding total return through share price growth and dividends, and portfolio safety. In a big sell-off, pharmaceutical stocks are among the last to hit the sales tape. With the best earnings revisions numbers, and what could be very dicey road ahead, they make very good sense now, especially after the controversial political comments sent prices plummeting lower.

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