For years, one of the most dependable sectors, especially for more conservative investors, was health care, which included the top pharmaceutical and biotech stocks among other holdings. However, over the past five years, the sector, while delivering positive total returns, has underperformed some of the more popular sectors, like technology.

With 2021 almost over and 2022 all but upon us, the decade-long expansion in the stock market faces a period of heightened volatility and risk, and the health care sector could benefit from a shift toward more defensive sectors. We screened our 24/7 Wall St. database for Buy-rated stocks in the sector with strong balance sheets, attractive dividend yields and improved cost structure. While all have Buy ratings, but it is still important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
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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 4.74% dividend. SVB Leerink recently trimmed its $148 price target on AbbVie stock to $142, but the Wall Street consensus target is just $122. The shares closed trading on Friday at $114.67, after rising almost 5% on the day.

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.
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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 3.36% dividend. The BofA Securities price target is $78, while the consensus target is $73.13. Bristol-Myers Squibb stock closed trading at $58.40 on Friday.

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.

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.

Investors in Gilead Sciences stock take a 4.36% dividend to the bank every quarter. Oppenheimer’s $100 price objective is the highest across Wall Street. The consensus target of $76.03, and Friday’s closing print was $64.88, after an almost 4% retreat on the day.

This remains a leading health care stock for conservative investors. Merck & Co. Inc. (NYSE: MRK) offers therapeutic and preventive agents to treat cardiovascular issues, type 2 diabetes, asthma, nasal allergy symptoms, allergic rhinitis, chronic hepatitis C virus, HIV-1 infection, fungal infections, intra-abdominal infections, hypertension, arthritis and pain, inflammatory, osteoporosis, male pattern hair loss and fertility diseases.
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The company also provides neuromuscular blocking agents for use in surgery, anti-bacterial products for skin and skin structure infections, cholesterol modifying medicines, non-sedating antihistamine and vaginal contraceptive products.

Shareholders receive a 2.95% dividend. SVB Leerink has a Wall Street high $105 target price. The consensus target for Merck stock is $94.33, and shares ended Friday at $88.05.

Takeda

This top Japanese pharmaceutical company is somewhat off the radar but pays an outstanding dividend, and its stock may have the biggest upside potential. Takeda Pharmaceutical Co. Ltd. (NYSE: TAK) engages in the research, development, manufacturing, marketing and out-licensing of pharmaceutical products worldwide.

It offers pharmaceutical products in the areas of gastroenterology, oncology, neuroscience and rare diseases (such as rare metabolic and hematological and hereditary angioedema), as well as plasma-derived therapies and vaccines. Takeda provides its products under the Entyvio, Gattex/Revestive, Alofisel, Natpara, Adynovate/Adynovi, Takhzyro, Elaprase, Vpriv, Gammagard Liquid/Kiovig, Hyqvia, Cuvitru, Albumin/Flexbumin, Ninlaro and Alunbrig brands.

Investors receive a 5.97% dividend. Jefferies upgraded the stock to Buy last week and has a ¥4,000 (about US$35.10) price target. The consensus target is $20.37, and Takeda Pharmaceutical closed on Friday at $14.02 a share.

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One very good reason for investors to consider these top companies is that, in a market that is massively overbought, something has to give. Maybe not today or tomorrow, but all signs are flashing yellow, and soon that red light will come up. While not impervious to being sold, these are classic defensive names that will hold up much better than crowded momentum stocks.

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