5 Drug Stocks for the New Year

Focus: STOCKS

Jim Jubak Image Jim Jubak Founder and Editor, JubakPicks.com

A rough year full of worries is coming to an end, but new woes await. These stocks look best for a year of higher taxes and Obamacare, writes MoneyShow's Jim Jubak, also of Jubak's Picks.

For the world's big drug companies, it's the end of a dark nightmare. Well, not quite the end. But it is the gray light before dawn. The worst seems to be over.

But you know what that means, right? You've seen this movie, right? New dangers threaten just when everyone thinks the coast is clear. (Zombies await everywhere.)

In the what-have-you-done-for-me-lately world of stocks, that means investors who have done very well with drug stocks in the past few years—but had to worry through 2012 as the patents on profitable drugs expired in large numbers—need to rethink their strategies.

It's not that some drug stocks won't be big winners next year; it's just that I don't think investors can count on the rising-tide-lifts-all-drug-stocks environment of recent past.

So how do you think about drug stocks now? On the surface, that seems like a strange question. But I'm asking.

In this column, I'll tell you why I think that is the right question to be asking now. I'll suggest a way to answer it—and a way to think about drug stocks. And I'll give you the name of five drug stocks that I think stand a good chance to outperform what I think will be a still-profitable but trickier-to-navigate sector.

Are the Big Gains Over?
In 2011, the SPDR S&P Pharmaceuticals (XPH) exchange traded fund returned 12.73% to the 1.89% return on the SPDR S&P 500 (SPY) ETF.