In this article, we discuss the 5 best drug stocks to buy now. If you want to read about some more stocks, go to 15 Best Drug Stocks to Buy Now.
5. Pfizer Inc. (NYSE:PFE)
Number of Hedge Fund Holders: 70
Pfizer Inc. (NYSE:PFE) is a leading New York-based drug company. The stock is considered among the best pharmaceutical stocks in the industry currently.
Pfizer Inc. (NYSE:PFE) has an attractive annual forward dividend yield of 3.81% as of October 17. The company’s conservative payout ratio of 25.99% suggests a secure dividend with scope for annual increases. The stock is trading at a trailing one-year price-to-sales multiple of 2.37x, which is significantly lower than the average of 4.28x for the healthcare sector. This reflects that the stock is trading at a discount.
Following the success of the Covid-19 vaccine, Pfizer Inc. (NYSE:PFE) is continuing to advance its medical pipeline with successful drug launches recently. The company has also used the strong cash flow generated by the sales of the COVID-19 vaccine to buy Biohaven Pharmaceuticals for $11.6 billion in October.
Carillon Tower Advisers discussed its insights on Pfizer Inc. (NYSE:PFE) in its Q2 2022 investor letter. Here’s what the firm said:
“Pfizer Inc. (NYSE:PFE) is a research-based global biopharmaceutical company. The United States agreed to pay Pfizer and its vaccine partner more than $3 billion in a deal for their messenger RNA shots against COVID-19. Additionally, the U.S. Food and Drug Administration authorized the company’s COVID vaccine for children aged 5 to 11.”
4. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Holders: 70
Eli Lilly and Company (NYSE:LLY) is an Indiana-based pharmaceutical company.
Eli Lilly and Company (NYSE:LLY) is spearheading the fight against Alzheimer’s disease through its anti-amyloid drug donanemab. The drug has received a priority review from the FDA. Furthermore, the company also received fast-track designation for its obesity care drug tirzepatide on October 6.
On September 30, Jasper Hellweg at Argus increased the target price from $315 to $360 and reiterated a Buy rating on Eli Lilly and Company (NYSE:LLY) stock. The analyst highlighted that Eli Lilly and Company (NYSE:LLY) is making major progress in its drug pipeline as it has received approvals for new drugs to treat alopecia areata, cancer, and type-2 diabetes. The approvals should boost the top line and bottom line of Eli Lilly and Company (NYSE:LLY) in the coming years, making it one of the best pharmaceutical stocks to hold in the long run.
Here’s what Baron Funds said about Eli Lilly and Company (NYSE:LLY) in its Q2 2022 investor letter:
“Eli Lilly and Company is a global pharmaceutical company focused on discovering, developing, and selling medicines for patients in the therapeutic areas of diabetes, oncology, immunology, and neuroscience. Stock performance was strong due to positive study results for Eli Lilly’s drug Tirzepatide (subsequently branded Mounjaro), which delivered up to 22.5% weight loss in adults with obesity. We think Tirzepatide is in the early innings of adoption in a large obesity market where penetration of anti-obesity medications is currently low. We continue to think Eli Lilly has a healthy base business with limited near-term patent expirations, a strong pipeline, and potential for significant margin expansion, which should translate to solid revenue and earnings growth over many years.”
3. AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders: 71
AbbVie Inc. (NYSE:ABBV) is a Chicago, Illinois-based pharmaceutical company that came into being following its spin-off from Abbott Laboratories (NYSE:ABT) in 2013.
In a research note issued on September 21, Chris Schott at JPMorgan picked AbbVie Inc. (NYSE:ABBV) as a top pick amongst the large-cap stocks. The analyst anticipates an attractive setup for AbbVie Inc. (NYSE:ABBV) in the upcoming quarters following more clarity on the dynamics of Humira drug. Keeping in view AbbVie Inc.’s (NYSE:ABBV) expansion plans, Schott anticipates strong bottom-line growth and cash flow expansion for AbbVie Inc. (NYSE:ABBV) in the future. Based on these expectations, the analyst has given AbbVie Inc. (NYSE:ABBV) stock an Overweight rating with a target price of $180.
Here’s what Baron Funds said about one of the best pharmaceutical stocks in its Q2 2022 investor letter:
“We added to our position in AbbVie Inc., a leading global biopharmaceutical company. We wrote about AbbVie in last quarter’s letter. We think Abbvie is well positioned for growth off trough earnings levels next year when the company’s lead drug Humira loses patent protection.”
AbbVie Inc. (NYSE:ABBV) was held by 71 hedge funds at the end of Q2 2022.
2. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 79
Merck & Co., Inc. (NYSE:MRK) is a Kenilworth, New Jersey-based drug company. The company is considered one of the best pharmaceutical stocks in the industry.
The company has joined hands with Moderna, Inc. (NASDAQ:MRNA) to develop an mRNA-based vaccine against cancer. Merck & Co., Inc. (NYSE:MRK) has agreed to make an upfront payment of $250 million to Moderna. In the next phase of the research, Moderna’s drug will be used alongside Merck’s Keytruda for the development of the treatments.
Following this development, Carter Gould at Barclays increased the target price for Merck & Co., Inc. (NYSE:MRK) from $101 to $105 and reiterated an Overweight rating on the stock in an investor note issued on October 12. Merck & Co., Inc. (NYSE:MRK) has also shown positive data related to the Phase-III trial of sotatercept for pulmonary arterial hypertension (PAT) treatment.
Carillon Tower Advisers shared its outlook on Merck & Co., Inc. (NYSE:MRK) in its Q2 2022 investor letter. Here’s what the firm said:
“Merck & Co., Inc. (NYSE:MRK) reported a strong first quarter and raised its financial guidance for 2022. The company also continues to benefit from the recent rotation into pharmaceuticals, which historically has been a more defensive industry.”
1. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 83
Johnson & Johnson (NYSE:JNJ) is a New Jersey-based pharmaceutical and consumer healthcare company.
The company is working on spinning off its consumer health division to increase its focus on its high-risk and high-reward pharmaceutical and medical devices divisions. Johnson & Johnson (NYSE:JNJ) is expected to have greater flexibility to invest more in innovation and pursue mergers and acquisitions (M&A) following the restructuring. Furthermore, Johnson & Johnson (NYSE:JNJ) has reported positive combination data in a trial targeted toward the treatment of ulcerative colitis during Q2. In a research note issued on October 5, Joanne Wuensch at Citi gave Johnson & Johnson (NYSE:JNJ) stock a target price of $198, along with a Buy rating.
Distillate Capital Partners LLC shared its outlook on Johnson & Johnson (NYSE:JNJ) in its Q2 2022 investor letter. Here’s what the firm said:
“Johnson & Johnson was among the 2 largest trims at around 1% each. Each stock was up 1% in the quarter compared to the 16% price decline for the S&P 500 and the positions were reduced as the valuations became somewhat less appealing, though still attractive enough to warrant inclusion.”
Johnson & Johnson (NYSE:JNJ) is also one of the best pharmaceutical stocks popular amongst hedge funds. As of Q2 2022, 83 funds held a stake in the company.
You can also take a peek at the Best Alternative Energy Stocks To Buy and the Best Stocks For Dividends.
