The Dow’s Best Health Care Stock: Merck & Co., Inc. (MRK)

Page 1 of 2

Investing in the health care sector isn’t easy. Where do you start out? From medical device companies to big pharma to small biotech firms bristling with boom-or-bust prospects, it’s tough for investors new to this sector to understand the intricacies unique to health care. Fortunately, there’s an easy place to look for blue-chip, tried-and-true stocks: the Dow Jones Industrial Average .

Four big-time health care stocks call the Dow home, but which one is the best pick for your money? In this five-part series, we’ll take an in-depth look into why each health care stock on the Dow is worth investing in — and in the final installment, we’ll select a winner. Yesterday we took a look at the present and future of big pharma giant Pfizer Inc. (NYSE:PFE); today, let’s check out one of its biggest rivals: Merck & Co., Inc. (NYSE:MRK).

Merck & Co., Inc. (NYSE:MRK)An income investor’s delight
Merck’s recent gains aren’t enough to raise eyebrows, but the stock’s still pleased investors lately. In the past 52 weeks, shares of the big pharma have gained more than 15%. However, things haven’t been so easy in the shorter term: The last three months have seen Merck lose 2.8% as the company struggles with patent expirations and their hit on revenue.

For income investors, however, Merck & Co., Inc. (NYSE:MRK)’s at the top of its game. The company offers a 4% dividend yield, tops among the health care stocks of the Dow and one of the highest-yielding stocks on the index overall. A payout ratio of 78% makes that high yield a pricey endeavor, however.

Growth investors will need to see more, however — particularly as Merck struggles to combat falling sales due to the patent cliff.

The present state of Merck’s drug portfolio
The loss of patent exclusivity on top-selling allergy and asthma blockbuster Singulair has undoubtedly hurt Merck’s pharmaceutical revenue. The drug’s still the company’s second-best-selling therapy, but sales plummeted 30% in 2012 due to generic competition. Merck & Co., Inc. (NYSE:MRK)’s going to have to kick its other medications into high gear in order to make up the more than $1.6 billion in lost sales.

Fortunately, some of Merck’s others therapies are picking up the slack. HPV vaccine Gardasil has come on strong in recent years, posting a nearly 35% gain in 2012 after hitting blockbuster status a year earlier. With Gardasil’s patent exclusivity lasting way down the road until 2028 — and an increasing public awareness about the dangers of HPV recently — count on this vaccine to remain a staple of Merck’s pharmaceutical revenue for years to come.

Merck’s already-on-the-market drug of the future, however, is the Januvia and Janumet family of diabetes therapies. These drugs are already a foundation of Merck’s success, with a combined $5.7 billion in 2012 sales; however, there’s room for even more growth. Don’t expect the diabetes market to slow down any time soon with obesity rates rising across the world. The drug family saw much of its 23% growth last year in the U.S. and Japan, and if Merck can expand that success elsewhere — particularly in emerging markets, no stranger to climbing obesity rates — Januvia and Janumet could make investors forget all about Singulair.

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!