Needless to say, 2021 has been a banner year for equities, with the S&P 500 up a stunning 25%. While the going was pretty easy by historical standards, with only one 5% drop year to date, there is a good chance that 2022 could bring some tougher sledding. The tapering of the quantitative easing program, which was designed to keep interest rates low, starts this month, and some feel that the Federal Reserve may be forced to raise interest rates earlier than expected due to the surge in inflation.
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Given the potential for a more difficult 2022, the equity strategists at BofA Securities are focusing on three top sectors to own for 2022, and one with some of the biggest upside potential is health care, after it underperformed the S&P 500 in 2021. In a new research report, the firm coins the term “the forgotten sector” when referring to health care. The report said this:

We had a health care crisis, US Health Care companies saved the world from a deeper recession, the U.S. government, consumers and corporations are likely to spend more on Health Care in the years to come – but the sector has underperformed the S&P 500 by 15% since the beginning of 2020.

We screened the BofA Securities health care universe looking for stocks rated Buy that offered big dividends. With the potential for far lower returns next year, total return becomes a key ingredient for investment success. Five top stocks look like very solid ideas for 2022. While they all are rated Buy, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

AstraZeneca

This stock offers investors a solid entry point after being hit hard in November. AstraZeneca PLC (NYSE: AZN) is a global, innovation-driven biopharmaceutical business that focuses on the discovery, development and commercialization of prescription medicines, primarily for the treatment of cardiovascular, metabolic, respiratory, inflammation, autoimmune, oncology, infection and neuroscience diseases. AstraZeneca operates in over 100 countries, and millions of patients worldwide use its innovative medicines.

This company also has an outstanding pipeline, especially in oncology. The broad pipeline of next-generation investigational medicines is focused on four main disease areas: ovarian, lung, breast and haematological cancers. These are being targeted through four key platforms: immuno-oncology, the genetic drivers of cancer and resistance, DNA damage repair and antibody drug conjugates.

Shareholders receive a 2.48% dividend. BofA Securities has a $69.40 price objective for AstraZeneca stock. The consensus target is $69.28, and the closing share price on Tuesday was $56.73.

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

Shareholders receive a 3.40% dividend. The BofA Securities price target is $78, while the consensus target is $73.12. Bristol-Myers Squibb shares closed on Tuesday at $57.45.

CVS Health

This top stock gapped up in early November but has come back in and offers a much better entry point. CVS Health Corp. (NYSE: CVS) is one of the largest health care companies in the United States, providing retail, mail and specialty pharmacy dispensing services and pharmacy benefits. CVS has become one of the most vertically integrated publicly traded health care companies.

CVS serves employers, insurance companies, unions, government employee groups, health plans, prescription drug plans, Medicaid managed care plans, plans offered on public health insurance and private health insurance exchanges, other sponsors of health benefit plans and individuals. This segment operates retail specialty pharmacy stores and specialty mail order, mail order dispensing, and compounding pharmacies, as well as branches for infusion and enteral nutrition services.

CVS completed a $69 billion purchase of health care provider Aetna in November of 2018 and remains one of the top picks for 2022 and beyond, as CVS has become one of the most vertically integrated publicly traded health care companies, and health care has lagged the S&P 500 significantly this year.

CVS Health stock investors receive a 2.15% dividend. The $112 BofA Securities price target is well above the $103.67 consensus target. The shares closed at $93.64 on Tuesday.

This is among the world’s largest pharmaceutical drug makers by sales and remains a top international pick across Wall Street. Novartis AG (NYSE: NVS) develops, manufactures and markets a range of health care products worldwide.
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Novartis operates through three segments: Pharmaceuticals, Alcon and Sandoz. The Pharmaceuticals segment offers patented prescription medicines for oncology, neuroscience, retina, immunology and dermatology, respiratory, cardio-metabolic, established medicines and cell and gene therapies. Key products include Cosentyx (for psoriasis and others), Entresto (heart failure), Lucentis (wet macular degeneration) and Gilenya (multiple sclerosis).

The company recently acquired Arctos Medical, adding a preclinical optogenetics-based AAV gene therapy program and Arctos’s proprietary technology to its ophthalmology portfolio. Arctos developed its technology as a potential method for treating inherited retinal dystrophies and other diseases that involve photoreceptor loss, such as age-related macular degeneration. Arctos’s proprietary, light-sensitive optogene is delivered to specific retinal cells using gene therapy, thus turning the targeted cells into replacement photoreceptor-like cells.

Investors receive a 3.93% dividend. BofA Securities has set a $100 price objective. The consensus target for Novartis stock is higher at $104, and Tuesday’s close was at $82.67 per share.

Patterson Companies

This off-the-radar health care idea has very solid upside potential. Patterson Companies Inc. (NASDAQ: PDCO) is one of the largest distributors of dental and veterinary, including both companion animal and production animal, supplies and equipment in the United States.

The company supplements its core logistics functions with additional value-added services to its primarily fragmented customer base. In September, the company reported outstanding fiscal first-quarter adjusted earnings that were better than analysts projected. Sales for the quarter ended July 31 was $1.61 billion, up strongly from a year earlier and topping consensus estimates. Looking ahead, the medical supplies maker raised its full-year fiscal 2022 adjusted EPS guidance.

Shareholders receive a 3.13% dividend. The BofA Securities price target for Patterson Companies is $37. The consensus target is $35.30, and shares closed most recently at $32.61.

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Most Wall Street strategists see tepid single-digit percentage gains for 2022, which, as we noted, makes the case for dependable dividends even more important. Plus, all these top stocks have been hit reasonably hard and are offering tremendous entry points. Investors nervous about the potential for a big correction in 2022 can feel comfortable owning any of these stocks now.

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