We recently published a list of 12 Best Affordable Stocks To Buy Right Now. In this article, we are going to take a look at where Merck & Co., Inc. (NYSE:MRK) stands against other best affordable stocks to buy.
Economic and Market Outlook 2025
There has been a growing debate regarding whether the economy of the United States will have a soft landing. A recent report by Vanguard titled “Beyond Landing” released on November 25 discusses the economic outlook for the year ahead. The report highlighted that global inflation has significantly decreased over the past two years, nearing the target of 2%. However, this decline has been inconsistent across different regions, with many developed markets experiencing slowdowns due to monetary policy adjustments. The United States stands out as an exception, showcasing robust economic growth and full employment despite restrictive monetary policies.
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The report raised critical questions about whether the US has achieved a “soft landing” or if high interest rates will eventually lead to a “hard landing.” The narrative has largely focused on the Federal Reserve’s ability to time rate cuts effectively to facilitate painless disinflation. Vanguard suggests that the strong growth and falling inflation in the US may be better explained by supply-side dynamics, such as increased labor productivity and a surge in available labor, rather than solely by Federal Reserve policies.
Regarding the 2025 outlook, the firm anticipates that US real GDP growth may decline from around 3% to closer to 2%, influenced by potential policy risks like trade tariffs and stricter immigration regulations. Core inflation is expected to remain above 2.5% for most of 2025. The firm also predicts that interest rates will stabilize at levels higher than those seen during the 2010s, fostering better returns in cash and fixed-income markets over the next decade. However, they express caution regarding equity markets due to elevated valuations. The report highlights a tension between momentum and valuation in risk assets, suggesting that while some stocks may continue to perform well, their high valuations could pose risks if economic conditions change unexpectedly.
A close-up of a person’s hand holding a bottle of pharmaceuticals.
Our Methodology
To compile the list of the 12 best affordable stocks to buy right now, we used the Finviz stock screener, Yahoo Finance, and Seeking Alpha. Using the screener we shortlisted stocks trading below a Forward P/E of 15, as of December 4, and that are expected to experience earnings growth this year. Next, we sorted our initial list by market capitalization and cross-checked the Forward P/E of each stock from Seeking Alpha and earnings growth from Yahoo Finance. Lastly, we ranked the stocks in ascending order of the number of hedge fund holders as per Insider Monkey’s database for Q3 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Merck & Co., Inc. (NYSE:MRK)
Forward P/E Ratio: 13.12
Earnings Growth This Year: 412.99%
Number of Hedge Fund Holders: 86
Merck & Co., Inc. (NYSE:MRK) is an international pharmaceutical company that manufactures and sells prescription medicines, vaccines, and animal welfare products. It engages in researching and developing treatments for serious health issues including cancer, cardiovascular diseases, and other infections.
The company’s blockbuster cancer treatment KEYTRUDA accounts for more than 44% of its total sales. During the third quarter of fiscal 2024, total sales grew 4% year-over-year to $16.7 billion, out of which KEYTRUDA sales contributed $7.4 billion, after improving 17% during the same time. While robust sales for this drug indicate a dominant market position, management has been focused on diversifying its drug portfolio.
On March 26, Merck & Co., Inc. (NYSE:MRK) got FDA approval for WINREVAIR, which treats adults with pulmonary arterial hypertension. Additionally, another drug called CAPVAXIVE, got approved in June. Since its launch, WINREVAIR has delivered $149 million in net sales. Lastly, the company’s Animal Health sales are also progressing well and grew 6% year-over-year to reach $1.5 billion during the quarter.
Columbia Dividend Opportunity Fund stated the following regarding Merck & Co., Inc. (NYSE:MRK) in its Q3 2024 investor letter:
“On the downside, Merck & Co., Inc. (NYSE:MRK) was the largest detractor from relative performance. The company experienced some demand headwinds in China for Gardasil, its vaccine to prevent cancer from HPV, which weighed on its shares, given that the country represents Merck’s largest market for the drug. The fund’s holdings in the large-cap bank stocks Wells Fargo and Bank of America, which both performed well in the first half of the year, turned lower in the most recent quarter and dampened results.”
Overall, MRK ranks 5th on our list of best affordable stocks to buy right now. While we acknowledge the potential of MRK to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MRK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
