Top 10 Health Care Stocks: Which To Buy? Part 3

Year to date, the SPDR S&P 500 Trust ETF (NYSEARCA:SPY) has outperformed Health Care ETF (NYSEARCA:XLV). The SPY has risen 6.6%, while the XLV has appreciated 4.1%. However, over the 5-year and 10-year periods, the XLV has outperformed the SPY. So, now that the Health Care sector as a whole underperforms the market in the short term, it may be time to consider investing new money in the sector.

Out of the three major drug manufacturers, Johnson & Johnson (NYSE:JNJ) is the highest quality and provides the steadiest growth and returns. However, it’s also the most expensive. To get a better value, consider Pfizer Inc. (NYSE:PFE) and Merck & Co., Inc. (NYSE:MRK) which trade at lower multiples with higher dividend yields to start.

To get more value and to maintain high quality, consider Amgen Inc (NASDAQ:AMGN) which trades at a reasonable multiple with an estimated growth of north of 7% per year and pays a safe and growing dividend.

UnitedHealth Group Inc (NYSE:UNH), Allergan plc (NYSE:AGN), and AbbVie Inc (NYSE:ABBV) are expected to deliver above average growth rates of more than 13% and they’re priced at reasonable valuations. However, investors should note AbbVie’s above-average debt levels and Allergan’s below average credit rating of BBB-.

Bristol-Myers Squibb Co (NYSE:BMY) and Gilead Sciences Inc (NASDAQ:GILD) are opposites. The former trades at more than 30x earnings with a growth rate of 20%. The latter trades at 7x earnings with a growth rate of 3%. Bristol-Myers is a growth play and Gilead Sciences is a value play.

The above is an excerpt from my Seeking Alpha article. So, to learn more about earnings estimates and dividend information of each company, check out the article here: Top 10 Health Care Stocks: Which To Buy? Part 3

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Disclosure: At the time of writing, I own shares in AMGN, ABBV, and GILD.

Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.

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Have New Money To Invest? Should You Invest in Consumer Discretionary Stocks?

In this article, we shall explore the Consumer Discretionary sector. Particularly, we will look at the valuations of the top 10 holdings (based on index weight) of the Consumer Discretionary Select Sector SPDR ETF (NYSEARCA:XLY). The ETF yields 1.8% compared to SPDR S&P 500 Trust ETF’s (NYSEARCA:SPY) 2.05%.

Year-to-date, the XLY has roughly tracked the SPY. Both have risen a few percentages.

Amazon.com, Inc. (NASDAQ:AMZN)

Amazon has appreciated 11.5% year-to-date, outperforming the XLY and SPY. Trading at a P/E of about 216, some investors wouldn’t touch it with a 10-foot pole.

That said, Amazon remains a strong disruptive force in retail, and its price follows its P/CFL much better than its P/E. If it continues that way, Amazon is likely to have more upside coming.

That said, Amazon is overbought in the near term. So, interested investors should try to see if they can buy it on dips to $630-$680 or lower.

Home Depot, Inc. (NYSE:HD)

Home Depot trades at about 23.3x earnings, but consensus analyst estimates its earnings per share [EPS] to grow at a rate of 14.6%, which supports a higher multiple. So, Home Depot can be viewed as fully-valued, rather than overvalued at the current level. I think a more concerning metric is its Debt/Cap of 76%.

Investors who really want to buy Home Depot shares should see if the shares will pull back about 9% to a P/E of 21 (at about $123 per share). Read More