Using closing prices for Healthcare stocks as of April 26, 2013, this report is based on analyst 1 yr target prices from stocks selected by yield from the following list of thirty:
The plan in April was to use analyst estimates as a "market sentiment" gauge of upside potential. Dow dividend dog theory picks from Yahoo sectors were supplemented with one year mean target price estimates reported by yahoo from broker analysts. Eight months of reality have now passed to provide a mid-term grade for the analyst April upside calls.
Wizards of Wall Street Weighed In
One year mean target price set by analysts multiplied by the number of shares in a $1k investment were used to compare nine stocks. The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts was considered optimal for a valid mean target price estimate.
Five April healthcare stocks boasted 1 yr. target price upsides exceeding 11% per analysts: Meridien Bioscience, Inc. (NASDAQ:VIVO) at 11.63% showed the lowest upside of those five. Mine Safety Appliances (NYSE:MSA) at 12.73% placed fourth. Teva Pharmaceutical (NYSE:TEVA) took the middle point of the five at 16.42%. Sanofi (NYSE:SNY) with 28.19% upside placed second. Finally, Herbalife Ltd. Co. (NYSE:HLF) exhibited a 51.92% analyst 1 yr, target price upside to lead the April healthcare dogs. Four other firms back in the pack showed 3.56% to 7.59% analyst estimated upsides.
Wall Street Meets Main Street
The contrast between April 26 closing prices compared to November 26 closing prices were reported and charted below.
The November price comparison showed four healthcare stocks exceeding 1 yr analyst mean target upsides, one above 67% of goal, two in positive territory but behind 67% of goal, and two slightly negative. The best price upside beyond projection was 82.07% posted by Herbalife Ltd. Co. . The negative performers were Baxter International, Inc. (NYSE:BAX) at minus 1.5%, and Sanofi exhibiting a 1% drop since April.
The Road Between Wall Street & Main St. Reality
Two charts and graph sets below document monthly price changes compared to analyst straight line incremental 1 yr target price projections for the nine healthcare sector stocks from April to November.
Price declines by Baxter International, Inc. and Sanofi since April are documented at the top of the graph. In contrast, price performances nearly in lie with analyst expectations as of November were shown by Mine Safety Appliances, Teva Pharmaceutical, and Pfizer Inc.(NYSE:PFE) as their prices swayed away from then rejoined their analyst vectors as graphed in the mid to lower part of the chart above.
Positive trajectories of price performance were demonstrated above. The strong vertical flight of Herbalife Ltd. Co. (rendered in aqua) dominates the top of the chart compared to its analyst yellow target projection. A more modest takeoff was exhibited by Medtronic, Inc. (NYSE:MDT) (represented in vermilion) in the middle of thee chart. Also at the bottom, Meridien Bioscience, Inc. price took off more discreetly in magenta. Of the four firms charted above, only Merck & Co., Inc. (NYSE:MRK) came closest to adhering to the analyst prescribed trajectory but finished November above grade.
The Road Ahead: Can Analyst Forecasts for Baxter and Sanofi Be Achieved?
As of November 26, nine healthcare stocks contrasted to their analyst annual net gain projections as follows:
Herbalife Ltd. Co. netted $832.10 in dividends and price less broker fees as of November. It was $302 ahead the April goal of netting $530, based on dividends plus mean target price estimate from seven analysts including $20 deducted for broker fees;
Sanofi netted a loss of $8.71 in dividends and price less broker fees as of November. It needed nearly $302 more to meet the analyst April goal of netting $293.53, based on dividend plus mean target price estimates from three analysts less broker fees. Analysts November 1yr. mean target price was pegged $10 lower than that for April. Which means Sanofi price will grow at a lower and slower trajectory than analysts projected in April.
Teva Pharmaceutical netted $55.92 in dividends and price less broker fees as of November. It needed about $116 more to meet the April goal of netting $171.96, based on dividend plus mean target price estimates from twenty analysts less broker fees.
Mine Safety Appliances netted $40.62 in dividends and price less broker fees as of November. It needed just over $90 more to meet the April goal of netting $130.80, based on dividend plus mean target price estimates from four analysts less broker fees.
Meridien Bioscience, Inc. netted $280.06 in dividends and price less broker fees as of November. It was nearly $145 ahead the April goal of netting $135.10, based on dividends plus mean target price estimate from eight analysts including $20 deducted for broker fees.
Medtronic, Inc. netted $231.44 in dividends and price less broker fees as of November. It was over $153 ahead the April goal of netting $78.38, based on dividends plus mean target price estimate from seventeen analysts including $20 deducted for broker fees.
Baxter International, Inc. netted a loss of $17.61 in dividends and price including broker fees as of November. It needed $92.30 more to meet the April goal of netting $74.69 based on dividends plus mean target price estimate from fifteen analysts less broker fees. Analysts November 1yr. mean target price is pegged $2.50 higher than that for April. Which means BAX price was expected grow at a steeper trajectory than analysts projected in April. BAX has a chance to catch up.
Merck & Co., Inc. netted $45.02 in dividends and price less broker fees as of November. It was slightly ahead of the analyst April trendline and had to make just $24.39 to meet the April goal of netting $69.41 based on estimates from fifteen analysts plus dividends less $20 in broker fees;
Pfizer Inc. netted $55.88 in dividends and price less $20 in broker fees as of November. It was nearly $8.50 ahead the April goal of netting $47.46, based on dividends plus mean target price estimate from eight analysts including $20 deducted for broker fees.
As of November 2014 the average net gain was 16.6% on $10k invested as $1k in each of these nine equities. This contrasted to an average net gain in dividend and price projected by analysts by April of 17.21%. This group of nine healthcare dogs is on track to surpass analyst forecasts if just Sanofi and Baxter can get back to even.
The ability of Analyst 1 yr mean target price projections to forecast performance is not fool proof. As of November the April forecasts in the healthcare sector were roughly 80% accurate. The final examination for this issue will be taken in April 2014. Stay tuned.
The stocks listed above were suggested only as decent starting points for a sector dog dividend stock purchase research process in April 2013. These were not recommendations.
Gains as reported do not factor-in any tax problems resulting from distributions. Consult your tax advisor regarding the source of "dividends" from any investment.
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, PFE. 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.