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By Darnell Brown

One of the best performing areas of the stock market has been the medical sector. This sector is comprised of bellwether dividend paying companies, as well as fast growing biotech companies. This article will examine five medical companies that could improve your portfolio.

Abbott Laboratories (NYSE:ABT) has a market cap of $87.59 billion with a price to earnings ratio of 19.4. The stock has traded in a 52 week range between $45.07 and $56.44. The stock is currently trading around $56. The company reported third quarter revenues of $9.8 billion compared to revenues of $8.6 billion in the third quarter of 2010. Third quarter net income was $303 million compared to net income of $890 million in the third quarter of 2010.

One of Abbott’s competitors is the Sanofi Company (NYSE:SNY). Sanofi is currently trading around $37 with a market cap of $98.09 billion and a price to earnings ratio of 19.4. Sanofi pays a dividend which yields 3.7% versus Abbott whose dividend yields 3.4%.

Abbott produces and sells pharmaceutical and healthcare products. The company increased its year-over-year third quarter revenues by 14%. The company’s year-over-year third quarter net income decreased by 193% because of increased selling and administration expenses. Despite the company's lower third quarter net income the stock is up by 17.5% over the last 52 weeks. I believe that is because of two reasons: 1) Investors have moved towards safe dividend paying stocks; and 2) Abbott will not lose revenues due to impending patent expirations while key competitors like Bristol-Meyers Squibb (NYSE:BMY) and Eli Lily (NYSE:LLY) will.

In a separate matter on October 19th, it became public that the company would be splitting its pharmaceutical business off from its diversified medical products business. Mr. White the company’s chief executive officer stated that the split was “partly driven by the changes in the investment landscape, that had seen investors expect returns in the form of dividends and cash, and place little or no value on pipeline products.”

It was widely speculated that the split was done so that the pharmaceutical business could be sold off. However, the speculation was quashed on December 6th, when Mr. White announced that the pharmaceutical business would not be sold. While it now seems unlikely that speculative investors will be unable to make a quick profit from the sale of the pharmaceutical division, conservative investors will like the companies growing revenues and growing dividend.

Amgen Inc. (NASDAQ:AMGN) has a market cap of $56.28 billion with a price to earnings ratio of 15.9. The stock has traded in a 52 week range between $47.66 and $65.00. The stock is currently trading around $64. The company reported third quarter revenues of $3.9 billion compared to revenues of $3.8 billion in the third quarter of 2010. Third quarter net income was $454 million compared to net income of $1.2 billion in the third quarter of 2010.

One of Amgen’s competitors is Novartis AG (NYSE:NVS). Novartis is currently trading around $57 with a market cap of $138.28 billion and a price to earnings ratio of 13.47. Novartis pays a dividend which yields 3.5% versus Amgen whose dividend yields 2.2%.

Amgen is a biotech company that develops medicines for a variety of diseases. Over the last five years, the company’s revenues have been relatively flat. The company’s third quarter revenues were up by 2% while its net income was down by 64%. In 2010, the company’s year-over-year revenues were up by 7% and its net income was flat. On November 21st CNBC stock analyst Jim Cramer discussed Amgen and said "that's one of the slower growers. It's stuck in the mud."

The good news is Amgen has a strong balance sheet with over $17 billion in cash, and the stock has risen by 10.8% over the last month. However because of the company’s slow growth and relatively low dividend yield, I think that there are better picks in the biotech sector. Prospective investors should do further research.

Elan Corporation Inc. (NYSE:ELN) has a market cap of $8.08 billion with a price to earnings ratio of 12.62. The stock has traded in a 52 week range between $5.73 and $14.02. The stock is currently trading around $14. The company reported third quarter revenues of $328 million compared to revenues of $164 million in the third quarter of 2010. Third quarter net income was $674 million compared to net income of $-47.1 million in the third quarter of 2010.

One of Elan’s competitors is Pfizer Inc. (NYSE:PFE). Pfizer is currently trading around $22 with a market cap of $166.35 billion and a price to earnings ratio of 15.03. Pfizer pays a dividend which yields 3.7% versus Elan, which does not pay a dividend.

Elan is a biotech company that has its headquarters in Dublin, Ireland. Elan has lost money in each of the last nine years. However in the third quarter the company began to turn things around. Third quarter year-over-year revenues increased by 100%. Third quarter year-over-year net income increased from $-47 million to $674 million.

The primary reason for the earnings increase was the company’s sale of its EDT drug technology unit for a profit of $657 million. The company also benefitted for the rapidly increasing sales of its new multiple sclerosis drug, Tysabri. Elan’s chief executive Kelly Martin said, “Tysabri demand continues to grow quarter over quarter and year over year.” Predictably the stock price has exploded and is up by 135% over the last 52 weeks.

The stock price has also increased because of rumors of a takeover bid by Johnson and Johnson (NYSE:JNJ). A December 29th press release said that shares of Elan were trading at a “ 52- week high and were up a fraction more at €10.34 yesterday as rumors of a possible bid from US healthcare giant Johnson & Johnson intensified.” The stock is currently trading just below its 52 week high, and I would be cautious about purchasing the stock at this time because of the run up in the stock price. The price to book ratio is 8.65. Prospective investors should do further research.

Biogen Idec Inc. (NASDAQ:BIIB) has a market cap of $26.73 billion with a price to earnings ratio of 22.92. The stock has traded in a 52 week range between $64.28 and $120.66. The stock is currently trading around $110. The company reported third quarter revenues of $1.3 billion compared to revenues of $1.1 billion in the third quarter of 2010. Third quarter net income was $351 million compared to net income of $254 million in the third quarter of 2010.

One of Biogen’s competitors is Merck & Company (NYSE:MRK). Merck is currently trading around $38 with a market cap of $114.91 billion and a price to earnings ratio of 27.56. Merck pays a dividend which yields 4.5% versus Biogen which does not pay a dividend.

Biogen is a biotech company that develops products for neurological disorders. The company has increased its revenues and net income in each of the last seven years. The company increased its year-over-year third quarter revenues by 18% and its net income by 38%. The reason for the company earnings increase is because of the sale of its drug Tysabri. Tysabri is used by multiple sclerosis and Crohn’s patients.

Biogen sells Tysabri through a partnership with Elan Corporation. Company executives believe that sales of Tysabri will continue to grow and will eventually bring in revenues of around $1.5 billion per year. The company has also seen increased sales from Avonex, which is also used by multiple sclerosis patients. The company’s stock price is up by 63.7% over the last 52 weeks and still has room to move higher.

Alexion Pharmaceuticals Inc. (NASDAQ:ALXN) has a market cap of $13.24 billion with a price to earnings ratio of 88.71. The stock has traded in a 52 week range between $40.04 and $72.25. The stock is currently trading near the top of its 52 week range at around $72. The company reported third quarter revenues of $204 million compared to revenues of $125 million in the third quarter of 2010. Third quarter net income was $65 million compared to net income of $28 million in the third quarter of 2010.

One of Alexion’s competitors is Baxter International Inc. (NYSE:BAX). Baxter is currently trading around $49 with a market cap of $27.9 billion and a price t earnings ratio of 13.09. Baxter pays a dividend which yields 2.7% versus Alexion which does not pay a dividend.

Alexion is a biopharmaceutical company that develops and markets products for patients with rare life threatening diseases. In the third quarter, the company increased year-over-year revenues by 63% and net income by 132%. The reason that earnings have increased is because of the sales of a product called Soliris. Soliris which treats a rare autoimmune disease called aHUS, recently received FDA approval. The company expects that the treatment will be approved for use in Europe in the near future.

As a result of the company’s strong third quarter earnings, and the expectation for the widespread use of Soliris, the company raised its 2011earnings forecast from $1.15 to $1.20 per share to $1.25 to $1.28 per share. In unrelated news on December 29th the company announced that it will purchase Enobia Pharmaceutical for $1.08 billion. As a result of the Soliris news, the company’s stock price has risen dramatically and is up by 75.8% over the last 52 weeks.

The stock price is up by 278% over the last three years. Alexion is currently trading just beneath its 52 week high, and its valuations (price to earnings ratio 88.71/price to book ratio 12.45) are much higher than the industry averages. Prospective investors should consider waiting for the stock price to take a dip before buying in.

Source: 5 Blue Chip Healthcare Stocks To Buy Now