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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