Covidien: Defensive Stock Pick With Strong Technical Support

| About: Medtronic plc (MDT)
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The market has had a great two week rally. However, as we are near the top of the current trading range, there is good chance that we will sell-off in the weeks ahead. Defensive stocks should again lead the overall market. One stock in the defensive health care sector that I like at these levels is Covidien (COV).

Business description from Yahoo Finance (see here):

Covidien Public Limited Company develops, manufactures, and sells healthcare products for use in clinical and home settings in the United States and internationally.

8 reasons why COV is a bargain at $46 a share:

  1. It appears COV has long term technical support in the $45 area (see the chart below, click to enlarge image):
  2. It is selling near the bottom of its historical valuation range based on P/E, P/B and P/CF.
  3. Covidien has beat earnings estimates each of the last six quarters. The average beat over consensus has been 9%.
  4. Covidien is selling at 10 times operating cash flow, has a low beta (.79) and is projected to grow EPS at a 12% clip annually over the next three years, according to S&P.
  5. COV has a five year projected PEG of 1, which is a 45% discount to its historical average.
  6. Covidien is selling at under analysts’ price targets. S&P has a price target of $64 on COV and the median analysts’ price target on Covidien is $60.
  7. COV has a forward PE of just 10.7, which is a 25% discount to its historical average.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in COV over the next 72 hours.