Opportunity Knocks: Pharma Stocks

Pharmaceuticals are priced at a bargain, said Mike Burnick, Weiss Capital Management director of research.

“They were out of favor over the last three or four years, even before the current market slowdown, which has made them even cheaper,” he said.


Burnick recommends GlaxoSmithKline — which beat earnings estimates Wednesday — Novartis and Johnson & Johnson .

“It’s [Johnson & Johnson] considered the Rolls-Royce of the industry,” he said. “That’s the bluest of the blue chips.”

Merck , for instance, is a good blue-chip name, but it still has “restructuring to do and of course the jury is always out on that, having steep job cuts,” said Burnick.

Pfizer , meanwhile, is a solid alternative to Merck.

“Pfizer is about as cheap as you can get,” he said. “It’s trading at about seven times this year’s earnings; it has a very nice dividend yield.”

Investor Caveat:

Despite attractive prices in the pharmaceutical sector, Vince Farrell of Soleil Securities recommends investors exercise caution.

“I think a degree of caution is called for here only because you have patent expirations and you have the threat—call it a threat of a new [presidential] administration renewing their focus on pharmaceutical costs,” said Farrell, a CNBC contributor.

Farrell is bullish on Pfizer and Johnson & Johnson.


Disclosure information was not available for Burnick or his firm.

Farrell is a regular CNBC contributor.