One thing has become increasingly obvious as the weeks have passed since the coronavirus threat entered the daily lexicon. Worried investors are unsure how to redeploy all the cash they have generated. In fact, money markets are currently bursting at the seams with an estimated $245 billion stashed in them. With money market yields very low, and some concern over all the backstopping for them, some investors are looking for conservative growth ideas, and big pharma may be the ticket.
One place that usually makes sense, in good times or bad, is the big pharmaceutical companies. Now is as good a time as any to own them. It should be noted that while a COVID-19 vaccine that is effective will be a breakthrough, most agree that it would probably not be a huge financial windfall for the company that makes the discovery. Yet, it would be a very positive corporate public relations windfall for sure.
We screened the Merrill Lynch pharmaceutical universe for stocks rated Buy and found four great ideas for nervous investors looking to put money back to work.
Abbott Laboratories
This top pharmaceutical and med-tech stock has very solid growth potential. Abbott Laboratories (NYSE: ABT | ABT Price Prediction) manufactures and sells health care products worldwide.
The company’s Established Pharmaceutical Products segment offers branded generic pharmaceuticals to treat pancreatic exocrine insufficiency; irritable bowel syndrome or biliary spasm; intrahepatic cholestasis or depressive symptoms; gynecological disorders; hormone replacement therapy; dyslipidemia; hypertension; hypothyroidism; Ménière’s disease and vestibular vertigo; pain, fever and inflammation; migraines; anti-infective clarithromycin; cardiovascular and metabolic products; and influenza vaccines, as well as to regulate physiological rhythm of the colon.
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Its Diagnostic Products segment provides immunoassay and clinical chemistry systems; assays used to screen or diagnosis cancer, cardiac, drugs of abuse, fertility, infectious diseases, and therapeutic drug monitoring; hematology systems and reagents; diagnostic systems and cartridges; instruments to automate the extraction, purification and preparation of DNA and RNA from patient samples, and detects and measures infectious agents; genomic-based tests; informatics and automation solutions; and a suite of informatics tools and professional services.
Abbott Labs is unveiling a coronavirus test that can tell if someone is infected in as little as five minutes, and it is so small and portable it can be used in almost any health care setting. Last Friday, the company received emergency use authorization from the U.S. Food and Drug Administration (FDA) “for use by authorized laboratories and patient care settings.”
Investors receive a 1.78% dividend. The Merrill Lynch analysts have their price target set at $95, but the Wall Street consensus target was last seen at $98.27. Abbott Laboratories stock closed Monday’s trading session at $79.34 per share, up over 6% on the day.
AstraZeneca
This stock offers investors a solid entry point after being hit hard in the panic selling. 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.
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AstraZeneca 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 very reasonable 3.12% dividend. The Merrill Lynch price objective for the stock is $51.70, and the posted consensus target is $53.05. AstraZeneca stock closed most recently at $44.53, up just shy of 5% on Monday.
Bristol-Myers Squibb
This remains a solid pharmaceutical stock to own and is on the Merrill Lynch US 1 list of top stock picks. Bristol-Myers Squibb Co. (NYSE: BMY) is a global pharmaceutical company focused on discovering, developing, licensing and marketing chemically synthesized drugs or small molecules and biologics in various therapeutic areas, including virology comprising human immunodeficiency virus infection (HIV), oncology, neuroscience, immunoscience and cardiovascular.
After the company reported solid fourth-quarter results, Merrill Lynch noted this:
Bristol reported strong 4Q results (though largely ahead of Street given the recognition of Celgene revenue). We highlight the 2020 / 2021 provided guidance as the key focus for investors, as well as +$5 billion increase in share repurchase. While guidance comes in light, we expect the results to be viewed favorably by the Street and look for share strength.
Shareholders receive a solid 3.30% dividend. The $75 Merrill Lynch price target is above the $70.82 consensus figure. Bristol-Myers Squibb rose just over 3% on Monday and closed at $54.39 a share.
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Eli Lilly
This is another company with solid upside potential, and it is a superb place for long-term conservative growth investors. Eli Lilly and Co. (NYSE: LLY) is a global health care company with numerous core products in a number of primary-care pharmaceutical markets. The company generates revenues from its pharmaceutical product and animal health segments.
The product portfolio includes Zyprexa (for schizophrenia and bipolar disorder), Gemzar (pancreatic cancer), Evista (osteoporosis), Cymbalta (depression), Cialis (erectile dysfunction), Strattera (attention deficit hyperactivity disorder), Erbitux (cancer) and Alimta (chemotherapy). Eli Lilly also has a strong presence in the diabetes market.
Eli Lilly results also came in strong for the fourth quarter, and the Merrill Lynch analysts said this:
With a strong close to 2019, Lilly’s industry-leading top- and bottom-line growth appears on track to continue in 2020. 2020 is shaping up to be a big year of clinical and regulatory catalysts across all of Lilly’s core franchises. Discontinuation of pegilodecakin, while a disappointment for Lilly’s oncology franchise, was already removed from our model.
The dividend yield is 2.19%. The Merrill Lynch price objective is $155. The consensus target is $146.14, and Eli Lilly stock was seen trading at $138.44, after a gain of 3.2% on Monday.
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Four top stocks have been hit hard, are rated Buy and have come with dependable dividends for years. Given that the market remains very volatile, and first-quarter earnings are right around the corner, it may make sense to buy partial positions now and see not only how the earnings come in, but what the forward statements and estimates look like.
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