Finding Alpha in the Healthcare Space: UnitedHealth Group Inc. (UNH), Merck & Co., Inc. (MRK), Pfizer Inc. (PFE)

Merck & Co., Inc. (NYSE:MRK) is yet another major drug manufacturer held by both Kahn and Orbimed.  The stock ranks third in Kahn’s portfolio and second in Orbimed’s.  With a beta of 0.35 and a dividend yield of 4.10%, this stock is a stable cash cow and would fit nicely in any portfolio.  Shares are only up 7.8% since the beginning of 2011, but if you bought the 2008 lows you would have made approximately 14% per year before any dividend payments. If you had bought the highs in 2008 you would be down about 32% right now, although after dividends you would only be down about 22%.

No one can know for sure if any of these healthcare stocks will generate healthy returns for your portfolio, but they represent some of the best plays in this space at the moment. My personal favorites mentioned here include UnitedHealth, Pfizer, and Merck.  I’m a big fan of Benjamin Graham’s approach to investing because it has worked considerably well for me, so noticing the two aforementioned stocks as top holdings in Kahn Brothers’ portfolio, I naturally want to follow suit.

Disclosure: I have no positions in any of the stocks mentioned above