6 medical stocks look like buys

Professional stock pickers are telling investors to buy medical and heatlh care stocks, but with some 500 publicly-owned health and medical stocks, which ones do you buy?

You always can buy a health or medical exchange traded fund, but why pay them management fees when you can put together your own mini medical fund?

Since it only takes six to ten stocks to diversify an entire portfolio, you certainly can create a diversified sector fund for yourself with five or six stocks.

In a bear market, which is what we’re still in, you want to buy the strongest stocks, because they’re most likely to be the market leaders when the market turns around.

Here are six medical products stocks that have bullish technicals in a bear market.

• Abbott Laboratories (ABT)
• Baxter (BAX)
• C.R. Bard (BCR)
* St. Jude Medical (STJ)
• Stryker (SYK)
• Techne Corp. (TECH)

Their daily charts are here and their point and figure charts, which show bullish price objectives, are here.

All of these stocks are pretty fairly priced based on their fundamentals but have room to move on the upside, as indicated by their price objectives. The all have return on equity of 19% or more, and they all have fairly high price earnings ratios while their PEG ratios are still in the buy range. The PEG ratio is the PE ratio divided by a stock’s projected growth rate. A PE of 20 and an earnings per share projected growth rate of 20 equals a PEG of 1.

Correction: Four of the stocks pay dividends. Based on today’s closing prices, ABT’s is 2.45%, Bax’s is 1.23%, BCR’s is 0.68% and SYK’s 0.5%.

Because they are fundamentally and technically strong, these stocks are good candidates for covered call trades where call options contracts for 100 shares are sold against 100 shares of the underlying stocks to generate premium income. Covered calls limit profits but do not limit losses and are risky.

I own long term calls, or LEAPs options, on STJ.

For educational purposes only. Investigate before you speculate.

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