Defensive Dividend Portfolio Buy Zones Part II: Health Care

Includes: ABT, BMY, JNJ, MRK, PFE
by: Parsimony Investment Research

We recently wrote a series of articles highlighting our Defensive Dividend Portfolio picks for 2012. We focused on the following low beta, defensive sectors:

  1. Utilities
  2. Healthcare
  3. Consumer Staples
  4. MLPs
  5. Mortgages REITs

As discussed in the previous articles, the global economy will continued to be weighed down by a debt problem that took over two decades to create. The leverage that has built up in the system will not unwind for years to come and it will continue to provide significant uncertainty and market volatility.

As central banks drive down short-term rates to deal with high debt levels and low growth rates, investors have been flocking to dividend stocks in search of yield. That said, any pullback in the market should be an opportunity to add to your low-beta dividend stock positions.

This next series of articles highlights our "buy zones" for the 2012 Defensive Dividend Portfolio.

Current "Buy Zones" (Part II: Health Care)

Due to the current market rally (which we believe will be short-lived), investors should consider waiting for a pullback in these stocks to enter a new position or to add to an existing position.

Most of the stocks below are currently in a positive uptrend. As such, investors should be looking for near-term areas of support as potential entry points.
(Click to enlarge)

Abbott (ABT) should get some decent support at the $54.00 level. As shown in the chart above, the stock recently broke below the 50-day moving average and it is entering the high-end of our "buy zone." Additional support will likely be found at the 200-day moving average ($51.89).

Buy Zone: $52.00-$54.00

(Click to enlarge)

Bristol Myers Squibb (NYSE:BMY) is in a strong long-term uptrend and we believe that this trend will continue throughout 2012. The stock may test the low from November ($29.90) on a pullback, but we think this level will provide strong support as it coincides with the 200-day moving average.

Buy Zone: $30.00-$31.00

Although Johnson & Johnson (JNJ) is still in a long-term uptrend, the stock has been trading in a range the past few months. On a market pullback, we expect JNJ to test the bottom part of its recent range again, and we would look to enter a position around this level.

Buy Zone: $61.00-$62.00

Merck (NYSE:MRK) has a downright beautiful chart the past few months. The stock is in a very strong uptrend and we would be a buyer on any meaningful dip. The stock may dip below the 50-day moving average on a pullback, but it shouldn't go too much below that level.

Buy Zone: $35.00-$36.00

Pfizer (NYSE:PFE) is also in a very strong uptrend. The 50-day moving average crossed over the 200-day moving average in mid-December, which is a bullish signal. The stock may test the 200-day moving average ($19.41) on a pullback, but we would be a buyer at that level.

Buy Zone: $19.50-$20.00

Disclosure: I am long ABT, JNJ.