Three More Defensive Stock Picks for 2013 (LLY, PFE, VTR)
Bank of America Merrill Lynch offered some defensive stock picks for 2013 in a research report. Two drug makers and an REIT focused on health care facilities made the list. They were Eli Lilly (NYSE: LLY), Pfizer (NYSE: PFE) and Ventas (NYSE: VTR).
Here is a quick look at how these three picks have performed recently and what analysts expect from them.
This Indianapolis-based leading pharmaceutical company has a market capitalization of more than $56 billion and a dividend yield of about 3.9 percent. The return on equity of more than 26 percent. The price-to-earnings (P/E) ratio is less than the industry average, and the operating margin is greater than the industry average. Short interest is more than one percent of the float, the lowest it has been since July.
Only six of the 22 analysts surveyed by Thomson/First Call who follow the stock recommend buying shares, and nine of them rate it at Hold. The mean price target, or where analysts expect the stock to go, is less than four percent higher than the current share price. That is less than the multi-year high from last October.
Shares pulled back more than eight percent following disappointing third-quarter results but have started to recover. The share price is more than 26 percent higher than a year ago. The stock has outperformed competitors such as GlaxoSmithKline (NYSE: GSK) and Pfizer, as well as the S&P 500, over the past six months.
This biopharmaceutical company is headquartered in New York City, and it has a market cap of more than $188 billion and a dividend yield near 3.4 percent. The P/E ratio is greater than the industry average, but so it the operating margin. The return on equity is less than that of Eli Lilly, but short interest is less than one percent. That is the lowest number of shares sold short since July. All but four of the 21 analysts surveyed recommend buying shares; eight of them rate the stock at Strong Buy. Their mean price target represents more than seven percent potential upside, a level the stock has not seen since 2007.
Pfizer shares also pulled back after its third-quarter report, but have recovered and are up more than 16 percent year to date. Still, the stock has underperformed competitors Merck (NYSE: MRK) and Novartis (NYSE: NVS) over the past six months, but it has outperformed the S&P 500.
Ventas is headquartered in Chicago, sports a market cap of more than $19 billion and offers a dividend yield near 3.8 percent. The P/E ratio is higher than the industry average, and the long-term earnings per share growth forecast is less than seven percent. The return on equity is less than five percent, but that is higher than those of competitors Health Care REIT (NYSE: HCN) and Healthcare Realty Trust (NYSE: HR). Shares sold short represent about two percent of the float.
Nine of the 15 analysts polled recommend holding shares, though three of them rate it at Strong Buy. They believe the stock has little room to run as their mean price target is less than three percent higher than the current share price. That target is less than the 52-week high from back in August.
Shares have traded mostly between $62 and $66 since August but are still more than 17 percent higher year to date. Over the past six months, the stock has outperformed the two competitors mentioned above and the broader markets.
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