John Buckingham is a leading value investing expert, money manager and editor of The Prudent Speculator; here, he assesses a trio of stocks involved in various sectors of healthcare — pharmaceuticals, biotech and drug distribution.

Gilead Sciences (GILD) is a biotech giant whose portfolio of products and pipeline of investigational drugs includes treatments for HIV/AIDS, liver diseases, cancer, inflammatory and respiratory diseases, and cardiovascular conditions.

The company delivered solid numbers for Q2, beating on both the top- and bottom-lines (adjusted EPS of $1.91 vs. $1.56 est. and revenue of $5.65 billion vs. $5.19 billion est.), but the performance was a bit overshadowed by the announcement that CEO John Milligan would be stepping down.

While we are not excited to see another C-Suite member depart, we were pleased to see the Q2 strength in the HIV business and stabilization in the hepatitis C franchise. We believe the better trends in the company’s core products plus pipeline potential in oncology and NASH medications in the second half of 2019 could be the tailwind the shares need to regain their glory.

We continue to be constructive on the firm’s solid balance sheet that allows management to buy back shares, and support and boost the dividend. Gilead trades for less than 12 times estimated earnings and yields 2.9%.

McKesson (MKS) is the largest pharmaceutical distributor in the U.S., providing drugs, medical products and supplies, as well developing, implementing and supporting information technology software that facilitates the integration of data through the health enterprise.

Although MCK reported adjusted EPS of $2.90 in fiscal Q1 2019 that was four cents better than the consensus estimate, shares tumbled because the beat was primarily driven by a reduced tax rate. MCK has weathered contract shifts, lower price inflation of generic drugs, attention from Capitol Hill and in the media, and most recently the acquisition of online pharmacy PillPack by Amazon (AMZN).

Operational headwinds are unlikely to subside soon, but the important role the company plays in getting medical supplies and medicines from manufacturers to pharmacies, clinics and hospitals remains vital. Continued integration of acquisitions and pending improvements in its health care IT business should help drive growth. MCK trades for 9.2 times next 12-month earnings expectations.

Pfizer (PFE) is a well-known global pharma giant. While it is difficult to forecast whether potential actions from Washington will lead to lower or pressured product pricing, PFE already agreed to defer some announced price increases after being criticized by President Trump.

 That considered, the company reported a solid Q2 with both its top- and bottom-line results outpacing analyst estimates. While many remain concerned about generic competition for some of Pfizer’s older drugs, as well as the pending Lyrica patent expiration in 2019, we believe that the market under-appreciates the company’s emerging pipeline of products and management’s increasing confidence in its organic growth potential.

We like the strong balance sheet and that management said it will continue to focus on dividend growth and share repurchases. Pfizer also continues to strategically review its consumer business. That said, it seems to have shifted away from M&A and is instead targeting growing its product pipeline. PFE yields 3.4% and trades for less than 13 times next 12-month earnings.

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