Market Pulse: My top healthcare stocks
Christmas is a wonderful season in more ways than one. Since our focus is on investing, I’ll stick with the markets. Here’s the good news: Dating back to 1933, the Dow Jones Industrial Average rose 78% of the time during the last seven trading days of the year. Of course that doesn’t ensure stocks will rise. Stock selection matters and my favorite recession-proof sector is Healthcare.
Clients in my Reduced Risk Income program hold Pfizer (PFE), Merck (MRK) or both. There’s lots of good news for these two dividend-paying stocks. Let’s start with Merck.
Merck is working on a formulation of Keytruda that can be given by injection rather than with an IV, which is the current method. It is in trials now. Keytruda’s patent protection ends in 2028, but would be extended to 2040 if the formulation works as expected and is patented. Recently Moderna said its mRNA vaccine in combination with Keytruda lowered the risk of recurrence or death from melanoma by 44% compared to Keytruda alone. Moderna’s stock rose 20% amid talk of a cancer vaccine. Merck rose a few points to an all-time high, too. Merck yields 2.7%.
Pfizer — The FDA granted priority review status to the company’s RSV vaccine for senior adults and granted fast track designation for its combination shot containing both the flu and COVID vaccines. Last week, the U.S. Army ordered an additional $2 billion of Paxlovid, Pfizer’s COVID pill, and China’s healthcare app began selling it online. It sold out in 30 minutes. China Meheco, a government-owned company, will sell Paxlovid as well. Cases in China are surging. Paxlovid is good news for China and good news for Pfizer. It is not a stretch to expect China to also allow Pfizer’s COVID vaccine since their own is less effective. Pfizer yields 3.2%.
Instead of purchasing individual equities, investors can own several companies by purchasing a healthcare ETF. For example, the SPDR Health Care ETF (XLV) holds 70 stocks with the largest companies (think UnitedHealth Group, Johnson and Johnson, Pfizer, etc.) having the highest weighting. Its expense ratio is a super-low 0.10%. A riskier ETF with more upside potential is iShares Biotechnology (IBB). Gilead Sciences, Amgen, and Vertex Pharmaceuticals are its three largest holdings. IBB’s expense ratio is 0.44%.
Demographics and aging populations here and overseas are tailwinds for the healthcare sector as well. After outperforming in 2022, don’t be surprised if these stocks are among the best performers in 2023. I won’t be.
David Vomund is an Incline Village-based Independent Investment Advisor. Information is found at http://www.VomundInvestments.com or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.
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