When the market was tanking, these stocks were hitting all-time highs
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This group of stocks, despite market losses mounting up was still breaking out at all-time highs. It looks like they are poised for more gains. This group includes Big Pharma. This group has been long seen as risky by investors seeking faster price increases. These companies are becoming more appealing due to their stable business models, steady dividends, and a decrease in other stock prices. Louise Chen of Cantor Fitzgerald, who is a managing director and follows biotech and pharmaceutical companies said “Some of that is because they’re defensive.” “The market has changed significantly.” There are many headwinds. These men have great balance sheets. The ‘patent Cliff’ has slowed them down. Patent cliff refers to the expected expiration of large drug patents. This allows for generic versions from competitors. That is more problematic for Merck or Pfizer, she said. Strong margins have also proven the Big Pharma companies to be inflation-proof. Chen said, “I believe they’ve got upside.” They have balanced books, I believe. They have a lot of different businesses and no one is going down. Although inflation may eventually catch up to the sector, she said that it has proven resilient. They’ve survived all the macro stuff. They survived Covid. They survived the Russian Ukraine conflict that is still ongoing. “They survived higher interest rates,” she stated. Chen noted that industry business models are beneficial. She said, “People look at their business models and think that it’s something lasting.” They are safer than biotech. Merck reached a new intraday record on Monday. Bristol-Myers Squibb also hit a new all-time record last week. Both Eli Lilly and Johnson & Johnson hit new highs in April, and are now about 3% below those levels. But that compares with the broader S & P 500 , which has been down more than 20% from its highs, with many components showing much steeper losses. Merck and J & J were slightly higher Tuesday, with the S & P down about 1.5%. In afternoon trading, Lilly was unaffected and Bristol-Myers slightly down. Pfizer is also slightly up, but still close to 14% below its December peak. Chen stated that there were concerns regarding Pfizer’s ability to continue to make money from its Covid-19 vaccine. Lilly is the leader of Pfizer’s growth, she stated, citing two highly innovative products. The first is for diabetes control, but it can also be used to treat obesity. And the second is for Alzheimer’s disease. Cantor targets a target price of $335 per month on Lilly. The firm’s target on Merck is $107 and J & J is $215. All of them are overweight. Lilly has a dividend yield of 3.9%, while J & J’s is 2.5% and Merck has a yield of 2.9%. Over the longer-term, regulatory concerns as well as fears about controlling drug prices have held the group back. Fundstrat’s chief of technical strategy Mark Newton stated that he had been looking at the group’s charts, and felt there was more potential. Newton stated that these charts are technically among the most impressive he’s seen for a while. It’s not often that you see something with a base of 15 to 20 years. The stock is just beginning to rise.” Even though Pfizer pulled back in December, he said that it was a good investment and the risk-reward ratio is now. He said, “Bristol-Myers seems to be on the brink.” He said that the stock had been based over the past month and a quarter. It set a new record, but the stock remains close to its peak in 2000 and 2016. Newton stated that this was the year when health care is at its best. It falls between June and July. It’s also good to be there in November. The relative momentum of this move is still very much in place. June and July are the best months for health care, seasonally speaking. Newton explained that you can see the strength of the entire group. It is a tremendous tailwind for both the market and the financials. Pharma could see a moment when many of these will work well. This group is my favorite. The average return in XLV, the S & P Select Sector SPDR Healthcare ETF, over 10 years has been 3.23% in July and 1.62% in June, Newton said. The normal bullish times are seeing health-care stocks rise. Newton also said that he enjoys using medical devices for health, but believes there is a lot to be gained from pharmaceuticals. He stated, “This would my number one group over the next five years.” This is a long-term, intermediate bullish call. This is exciting when you see these breakouts.
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