To say that hedge fund and mutual fund managers tend to follow the herd is an incredible understatement and always has been. While publicly they sometimes seem reluctant to discuss their holdings, especially stocks they short, the reality is that managers tend to talk among themselves, as they run in the same circles. Often those discussions are centered around their portfolios and what is in them.
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One sector that continues to draw a ton of fund manager interest is health care, and with good reason. In a frothy and seemingly still fully valued market like we are in now, combined with a witches’ brew of war in Ukraine, rising interest rates and the worst inflation in 40 years, the sector offers some stability for worried investors.

In a March 2022 global fund managers survey, over 30% of managers have piled into health care, so we screened the sector for the highest dividend-paying companies that were rated Buy at top firms on Wall Street. We found eight that look very attractive now. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

AbbVie

This is a top pharmaceutical stock pick 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 3.60% dividend. J.P. Morgan recently raised its $165 target price on AbbVie stock to $180. The consensus target is lower at $152.49. The stock closed trading on Thursday at $147.02 a share.

This biotech giant remains a safer way to play the massive potential growth in biosimilars. Amgen Inc. (NASDAQ: AMGN) discovers, develops, manufactures and delivers human therapeutics worldwide. It focuses on inflammation, oncology/hematology, bone health, cardiovascular disease, nephrology and neuroscience.
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The company’s products include the following:

• Enbrel to treat plaque psoriasis, rheumatoid arthritis and psoriatic arthritis
• Neulasta reduces the chance of infection due a low white blood cell count in patients with cancer
• Prolia to treat postmenopausal women with osteoporosis
• Xgeva for skeletal-related events prevention
• Otezla for the treatment of adult patients with plaque psoriasis, psoriatic arthritis and oral ulcers associated with Behcet’s disease
• Aranesp to treat a lower-than-normal number of red blood cells and anemia
• Kyprolis to treat patients with relapsed or refractory multiple myeloma
• Repatha, which reduces the risks of myocardial infarction, stroke and coronary revascularization

Shareholders receive a 3.29% dividend. The Jefferies target price is $280, while the consensus target for Amgen stock is $248.49. The final trade for Thursday came in at $235.86.

Bristol-Myers Squibb

This top company remains a solid pharmaceutical stock to own long-term. Bristol Myers Squibb Co. (NYSE: BMY) discovers, develops, licenses, manufactures and markets pharmaceutical products worldwide in the hematology, oncology, cardiovascular and immunology therapeutic classes.

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 3.06% dividend. The $78 BofA Securities price target compares with a $74.13 consensus target. Bristol-Myers Squibb stock closed on Thursday at $70.52.

Gilead Sciences

This stock is trading a very reasonable 9.05 times estimated 2022 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.
Gilead 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.
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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.

Investors in Gilead Sciences stock receive a 4.93% dividend. Oppenheimer’s $90 price objective is the highest on Wall Street. The consensus target is $73.10, and shares closed over 2% higher on Thursday to $59.20.

Eli Lilly

This is another large-cap pharmaceutical with solid upside potential, and it is a great pick for conservative 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.

Shareholders receive a 1.47% dividend. The Eli Lilly stock price target at BofA Securities is a Wall Street high of $315. The $306.44 consensus target is also well above Thursday’s close at $285.51, which was up over 3% for the day.

Merck

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.

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.

Investors receive a 3.53% dividend with Merck stock. J.P. Morgan has a $95 target price on the shares. The consensus target of $92.38 also compares with Thursday’s closing print of $78.94.

Pfizer

This top pharmaceutical stock was one of the winners in the COVID-19 vaccine race. Pfizer Inc. (NYSE: PFE) discovers, develops, manufactures, markets, distributes and sells biopharmaceutical products worldwide.
Pfizer offers medicines and vaccines in various therapeutic areas, including the following:

• Cardiovascular metabolic and women’s health under the Premarin family and Eliquis brands
• Biologics, small molecules, immunotherapies and biosimilars under the Ibrance, Xtandi, Sutent, Inlyta, Retacrit, Lorbrena and Braftovi brands
• Sterile injectable and anti-infective medicines and oral COVID-19 treatment under the Sulperazon, Medrol, Zavicefta, Zithromax, Vfend, Panzyga and Paxlovid brands.
• Pneumococcal disease, meningococcal disease, tick-borne encephalitis and COVID-19 under the Comirnaty/BNT162b2, Nimenrix, FSME/IMMUN-TicoVac, Trumenba and the Prevnar family brands
• Biosimilars for chronic immune and inflammatory diseases under the Xeljanz, Enbrel, Inflectra, Eucrisa/Staquis and Cibinqo brands
• Amyloidosis, hemophilia and endocrine diseases under the Vyndaqel/Vyndamax, BeneFIX and Genotropin brands.

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Shareholders are paid a 2.95% dividend. Wells Fargo’s price objective for Pfizer stock is $72. The consensus target of $59.86 is closer to Thursday’s closing share price of $54.24.

Walgreens

This huge drugstore chain operator is a safe retail play for investors looking to add health care now. Walgreens Boots Alliance Inc. (NASDAQ: WBA) operates as a pharmacy-led health and beauty retail company. It operates through three segments.

The Retail Pharmacy USA segment sells prescription drugs and an assortment of retail products, including health, wellness, beauty, personal care, consumable, and general merchandise products through its retail drugstores. It also provides specialty pharmacy services and mail services; this segment operates nearly 10,000 retail stores under the Walgreens and Duane Reade brands in the United States; and six specialty pharmacies.

The Retail Pharmacy International segment sells prescription drugs and health and wellness, beauty, personal care and other consumer products through its pharmacy-led health and beauty stores and optical practices, as well as online and an integrated mobile application. This segment operated 4,428 retail stores under the Boots, Benavides and Ahumada in the United Kingdom, Thailand, Norway, the Netherlands, Mexico and elsewhere, and 550 optical practices, including 165 on a franchise basis.

The Pharmaceutical Wholesale segment engages in the wholesale and distribution of specialty and generic pharmaceuticals, health and beauty products, and home health care supplies and equipment, as well as provides related services to pharmacies and other health care providers.

Investors receive a 4.03% dividend. The price target at Baird is $68, well above the consensus target of $53.55. Walgreens Boots Alliance stock closed at $47.48 a share on Thursday.

Eight very strong ideas in the health care arena for investors looking to stay in stocks but wanting to move away from high volatility technology. All these companies have had a decent run, so it may be smart to scale in capital, as it is very possible we see another big leg down after the recent three-day rally.

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