3 Healthcare Sector Dogs Seek 15% To 50% November Upsides

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 |  Includes: ABBV, ABT, AZN, BAX, GSK, JPM, LLY, MNK, MRK, MSA, MSFT, NDZ, NVS, PETS, SEM, SNY, TEVA, VIVO
by: Fredrik Arnold

This end of month report tallied results from here as verified using Yahoo Finance data for healthcare sector stocks as of market closing prices December 3 compared with analyst mean target price results one year hence. Three stocks claimed 15.11% to 50.28% price upsides. Baxter International, Inc. (NYSE:BAX) the Deerfield, IL medical instruments and supplies firm with 15.11% showed the least upside of those three. Between the top and trailing firms, Mine Safety Appliances Co. (NYSE:MSA) a medical appliances & equipment firm out of Cranberry TWP, PA exhibited a 15.52% price upside. Questcor Pharmaceuticals (QCOR) the Anaheim, CA headquartered biotechnology firm posted a 50.28% upside to lead those three. Seven other Healthcare entities back in the pack showed 6.42% to 13.71% price upsides.

On the downside, two stocks exhibited pending price slumps of 5.32% and 7.21% based on 1 yr. analyst mean target pricing. AstraZeneca (NYSE:AZN) a London based drug manufacturer - major presented the strongest 7,21% bearish sentiment while Meridian Bioscience, Inc. (NASDAQ:VIVO) a Cincinnati based diagnostic substances provider weighed 5.32% to the downside to least tempt hungry bears.

The charts above used one year mean target price set by brokerage analysts multiplied by the number of shares in a $1k investment to compare healthcare sector stocks showing the highest upside and downside price potential into 2014 out of 20 selected by yield. The number of analysts providing price estimates was noted after the name of each stock. Three to nine analysts were considered optimal for a valid mean target price estimate.

Since the fall of 2011 this report series applied dog dividend methodology to uncover possible buy opportunities in each of eight major market sectors listed by Yahoo Finance: basic materials (BasMats), consumer goods (ConGo), financials (Fins), healthcare (Heal), industrial goods (IndiGo), services (Svcs), technology (Tec), and utilities (Utes).

This report presumed yield (dividend / price) dividend dog methodology applied to any sector and compared that sector side by side with the Dow industrial index leaders. Below, the Arnold Healthcare Sector top dog selections for November were disclosed step by step.

Dog Metrics Filtered Out Ten Top Healthcare Stocks

Top ten healthcare sector dogs showing the biggest dividend yields by this screen as of December 3 represented four industries. Top healthcare sector stock was one of seven drug manufacturers - major on this list, AstraZeneca PLC (AZM). Nordion Inc. (NYSE:NDZ), second dog, represented the medical laboratories & research industry. In third place, Select Medical Holdings Corporation (NYSE:SEM) was the lone of hospitals representatives. PetMed Express (NASDAQ:PETS), in fifth, represented drug delivery firms. The other five major drug manufacturers placed fourth and sixth through tenth: GlaxoSmithKline (NYSE:GSK); Eli Lilly and Company (NYSE:LLY); Sanofi SA (NYSE:SNY); Merck & Co. Inc. (NYSE:MRK); Novartis AG (NYSE:NVS); AbbVie Inc. (NYSE:ABBV) completed the top ten healthcare dogs.

Dividend vs. Price Results Compared to Dow Dogs

The graph below of relative strengths of the top ten healthcare sector dogs by yield as of market close 12/3/2013 compared to those of the Dow industrials index was prepared to show projected annual dividend history from $10,000 invested as $1k in each of the ten highest yielding stocks along with the total single share price of those ten stocks with the data points shown in green for price and blue for dividends.

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Actionable Conclusion (1): Healthcare & Dow Dogs Got Bullish

The Healthcare collection of dividend payers reverted to a very bullish course after October as total single share price shot up 13.8% and aggregate dividend from $10k invested as $1k in each of the top ten healthcare dogs dropped at a rate of over 2% for the period. The healthcare pack again entered overbought territory as aggregate single share price moved atop dividend derived from $10K invested as $1k in each. The fully bullish market signal was emphasized by the author's use of a stock screen excluding microcap price and dividend data.

For the Dow dogs, meanwhile, projected annual dividend from $10k invested as $1K in each of the top ten Dow dogs increased over 2.5% since November 20, while aggregate single share price fell 1.4%. The Dow dogs overbought condition in which aggregate single share price of the ten exceeded projected annual dividend from $10k invested in those ten (@$1k each) shrank again. The overhang was $161 or 43% for September; shrank down to $111 or 30% for October; expanded to $171 or 47'% November 11; backed off to $127 or 34% November 20; shrank again to $108 or 29% to end November. Much of this bear chase was triggered by Microsoft (NASDAQ:MSFT) replacing JPMorgan Chase (NYSE:JPM) in the top ten Dow dogs in mid-November.

To quantify the top dog rankings, analyst mean price target estimates provided a "market sentiment" gauge of upside potential and so were added to the simple high yield "dog" metric used to dig out bargains.

Actionable Conclusion (2): Wall Street Wizards Wisdom Willed An 9.3% Net Gain from Top 20 Healthcare Dogs Come 2014

Top twenty dogs from the Healthcare sector were graphed below to show relative strengths by dividend and price as of November 1, 2013 and those projected by analyst mean price target estimates to the same date in 2014.

A hypothetical $1000 investment in each equity was divided by the current share price to find the number of shares purchased. The shares number was then multiplied by projected annual per share dividend amounts to find the dividend return. Thereafter the analyst mean target price was used to gauge the stock price upsides and net gains including dividends less broker fees as of 2014.

Historic prices and actual dividends paid from $20,000 invested as $1k in each of the highest yielding stocks and the aggregate single share prices of those twenty stocks divided by 2 created data points for 2013. Projections based on estimated increases in dividend amounts from $1000 invested in the twenty highest yielding stocks and aggregate one year analyst target share prices from Yahoo Finance divided by 2 created the 2014 data points green for price and blue for dividend graphed from the plus row in the chart below exhibiting the 9.3% net gain.

Factoring in a .42% loss from the four negative net stocks introduced above, a net net gain of 8.88% results.

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Yahoo projected a 5.4% lower dividend from $10K invested as $1k in ten dogs in this group while aggregate single share price for those ten was projected to increase by 8% in the coming year.

The number of analysts contributing to the mean target price estimate for each stock was noted in the next to the last column on the charts. Three to nine analysts was considered optimal for a valid projection estimate. Estimates provided by one analyst were not applied (n/a).

A beta (risk) ranking for each stock was provided in the far right column of the above chart. A beta of 1 meant the stock's price would move with the market. Less than 1 showed lower than market movement. Higher than 1 showed greater than market movement. A negative beta number indicated the degree of a stocks movement opposite of market direction.

Actionable Conclusion (3): Analysts Forecast Ten 2014 Healthcare DiviDog Net Gains of 6.8% to 50.4%

Five of the ten top dividend yielding healthcare dogs were verified as being among the ten gainers for the coming year based on analyst 1 year target prices. So this month the dog strategy for the financial sector as graded by Wall St. wizards was 50% accurate.

Ten probable profit generating trades were revealed by Thompson/First Call in Yahoo Finance for 2014:

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Questcor Pharmaceuticals netted $504.13 based on estimates from eight analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 12% less than the market as a whole.

Baxter International, Inc. netted $160.47 based on estimates from fourteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 43% less than the market as a whole.

Mine Safety Appliances Co. netted $159.57, based on dividends four analysts less broker fees. The Beta number showed this estimate subject to volatility 61% more than the market as a whole.

Sanofi netted $153.63, based on dividends plus mean target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 14% more than the market as a whole.

Eli Lilly and Company netted $147.03 based on dividends plus mean target price estimate from seventeen analysts less broker fees. The Beta number showed this estimate subject to volatility 68% less than the market as a whole.

Nordion Inc. netted $133.94 based on dividends plus the mean of annual price estimates from five analysts less broker fees. The Beta number showed this estimate subject to volatility 48% less than the market as a whole.

GlaxoSmithKline PLC netted $98.98 based on dividends plus a mean target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 36% less than the market as a whole.

Select Medical Holdings netted $95.38 based on dividend plus a mean target price estimate from six analysts less broker fees. The Beta number showed this estimate subject to volatility 37% more than the market as a whole.

Teva Pharmaceutical Industries Ltd (NYSE:TEVA) netted $86.67 based on dividends plus the mean of annual price estimates from twenty-one analysts less broker fees. The Beta number showed this estimate subject to volatility 4% less than the market as a whole.

Abbott Labs (NYSE:ABT) netted $67.79 based on a mean target price estimate from eighteen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 34% less than the market as a whole.

Average net gain in dividend and price was 16% on $10k invested as $1k in each of these ten dogs. This gain estimate was subject to average volatility 13% less than the market as a whole.

Actionable Conclusion (4): (Bear Alert) Analysts Forecast 2 Healthcare DiviDogs to Post Net Losses of 4.1% $ 4.3% By October 2014

Two probable losing trades revealed by Yahoo Finance for 2014 were:

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AstraZeneca lost $42.74, based on dividend and mean target price estimates from three analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 13% less than the market as a whole. .

Meridian Bioscience, Inc. lost $41.11 based on dividend and a mean target price estimate from seven analysts including broker fees. The Beta number showed this estimate subject to volatility 40% more than the market as a whole.

The average net loss in dividend and price was 4.2% on $2k invested as $1k in each of these two dogs. This loss estimate was subject to average volatility 14% more than the market as a whole.

The net gain and loss estimates above did not factor-in any foreign or domestic tax problems resulting from distributions. Consult your tax advisor regarding the source and consequences of "dividends" from any investment.

Stocks listed above were suggested only as possible starting points for your index dog dividend stock purchase research process. These were not recommendations.

Disclaimer: This article is for informational and educational purposes only and should not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security. Prices and returns on equities in this article except as noted are listed without consideration of fees, commissions, taxes, penalties, or interest payable due to purchasing, holding, or selling same.

Disclosure: I am long JNJ, GE, INTC, MCD, MSFT, PFE, T, VZ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.