With the S&P 500 (SPX) up 22.8% over the past six months and the Nasdaq (NDX) surging an even stronger 36.0%, there’s no denying that equities are running hot. However, when markets rise this rapidly, they can also reverse just as quickly—making portfolio security increasingly essential. Among the standouts, the pharmaceutical sector has emerged with renewed momentum, buoyed by supportive political shifts and promising internal developments.
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Merck (MRK), AbbVie (ABBV), and Bristol-Myers Squibb (BMY) are positioning for long-term strength through strategic internal moves that could appeal to value-focused investors.
Following the powerful rally since April, the S&P 500 now trades around 23x forward earnings—well above its historical average—making it increasingly difficult for investors to find attractive entry points in today’s elevated market.
Still, opportunities remain for those willing to look beyond the market’s high flyers. One area that continues to offer relative value is healthcare. The Health Care Select Sector SPDR Fund (XLV)—which tracks healthcare stocks within the S&P 500—has gained just 2.7% over the past six months, dramatically underperforming the broader index. Within the sector, many established names trade at appealing valuations and offer robust dividend yields, suggesting this lagging corner of the market may be primed for a catch-up.
If we focus on three standout bargains within healthcare—Merck (MRK), AbbVie (ABBV), and Bristol-Myers Squibb (BMY)—each trades at a relatively attractive valuation and offers a dividend yield between 3% and 5.4%, making them compelling picks for both value-oriented and income-focused investors.
Merck (NYSE:MRK)
Pharma giant Merck (MRK) is up just 0.9% over the past six months, meaning it has sat out much of the broader market rally—leaving ample room for a potential catch-up trade.
The primary concern weighing on Merck shares is the looming loss of U.S. patent exclusivity for KEYTRUDA, its blockbuster oncology drug and top revenue driver, in 2028. That’s significant, as KEYTRUDA accounted for more than half of Merck’s total sales in the first half of 2025. The drug continues to grow rapidly, with third-quarter revenue up 10% year-over-year to $8.1 billion.
Still, several factors should help cushion the blow once exclusivity expires. First, KEYTRUDA will retain international patent protection through 2031–2033, preserving a sizable portion of global revenue. Second, Merck has developed a subcutaneous (under-the-skin) version of the drug, which is more convenient for patients and is protected by a separate patent. The FDA approved KEYTRUDA QLEX for subcutaneous administration in September, followed by additional approvals in October.
Beyond KEYTRUDA, Merck’s pipeline remains strong. Its new pulmonary arterial hypertension treatment, Winrevair, and its 21-valent pneumococcal conjugate vaccine, Capvaxive, generated $615 million and $236 million in sales, respectively, during the first half of the year. Analysts expect both to become multi-billion-dollar franchises over time, suggesting Merck’s future growth drivers are already taking shape.
Valuation also supports the bullish case. At a market cap of $215 billion, Merck trades at just 9.5x 2025 earnings estimates—less than half the broader market’s ~23x multiple—implying much of the concern is already priced in.
Finally, Merck offers income investors an attractive 3.7% dividend yield, nearly triple that of the S&P 500. The company has paid dividends for 35 consecutive years and raised its payout for 14 straight years, underscoring its reliability and shareholder-friendly approach.
Is MRK Stock a Buy?
Turning to Wall Street, MRK earns a Moderate Buy consensus rating based on four Buys, six Holds, and zero Sell ratings assigned in the past three months. The average MRK stock price target of $96.10 implies almost 15% upside potential over the next 12 months.
AbbVie (NYSE:ABBV)
Shares of biopharma giant AbbVie (ABBV) have climbed 11.8% over the past six months—well ahead of Merck’s performance, though still trailing the broader market by a wide margin.
The $385 billion company is best known for its portfolio of blockbuster immunology drugs, including Humira, which treats rheumatoid arthritis, psoriasis, and related conditions; Skyrizi, which also targets psoriasis and other autoimmune diseases; and Rinvoq, used to treat inflammatory disorders. Beyond immunology, AbbVie has a diverse presence in oncology, neuroscience, and aesthetics (notably through Botox), making it one of the most well-rounded players in the pharmaceutical space.
Despite its strengths, AbbVie faces meaningful challenges. The stock slipped roughly 4.5% last week following the release of its Q3 earnings. While results were solid—earnings of $1.86 per share (beating estimates of $1.77) on 9.1% revenue growth to $15.78 billion—investors focused on a steep decline in Humira sales, which fell 55% year-over-year to $993 million amid growing biosimilar competition. On the positive side, Skyrizi and Rinvoq continue to deliver exceptional growth, with sales up 47% and 35%, respectively. Revenue in AbbVie’s oncology and aesthetics segments dipped slightly, down 0.3% and 3.7%, but the company’s diversified portfolio remains a key stabilizer.
While AbbVie’s near-term headwinds mirror those of Merck, its valuation is considerably higher. The stock trades at 20.6x 2025 earnings estimates, which is above Merck’s multiple but still modestly below the S&P 500’s ~23x forward earnings.
For income-focused investors, AbbVie remains an appealing dividend play. The company offers a 3.0% yield and has raised its dividend every year since its 2013 spin-off from Abbott Laboratories (ABT). Continuing that streak, AbbVie announced during earnings that it will boost its next quarterly payout—payable February 17, 2026—from $1.64 to $1.73 per share.
Is ABBV Stock a Buy?
ABBV earns a Moderate Buy consensus rating based on 15 Buys, seven Holds, and zero Sell ratings assigned in the past three months. The average ABBV stock price target of $244.05 implies 13.5% upside potential over the coming year.
Bristol-Myers Squibb (NYSE:BMY)
Lastly, Bristol-Myers Squibb (BMY) remains a cornerstone of the pharmaceutical industry, although its stock has underperformed lately, falling 8.2% over the past six months, lagging behind both Merck and the broader market.
BMY is a major player in therapeutics spanning oncology, HIV, cardiovascular disease, and more. Its name is most closely tied to a trio of blockbuster drugs—Opdivo (immunotherapy), Eliquis (blood thinner), and Revlimid (cancer treatment)—that have fueled much of its past success.
However, those same blockbusters now represent the company’s biggest challenge. Revlimid has already lost exclusivity, while Eliquis and Opdivo are both expected to face generic competition by 2028. Understandably, investors are concerned about the impact on future revenue. That said, management is already taking steps to mitigate this risk.
BMY is developing a subcutaneous version of Opdivo, which would be more convenient for patients and protected by separate patents. According to COO Adam Lenkowsky, the company aims to convert 30%–40% of Opdivo sales to this version before exclusivity expires, shielding a significant portion of revenue from generic erosion.
Importantly, BMY is not standing still. The company organizes its treatments into two segments: its Legacy Portfolio—which includes its aging blockbusters—and its Growth Portfolio, featuring newer therapies such as Breyanzi, Reblozyl, Camzyos, and Cobenfy. In the most recent quarter, revenue from the Legacy Portfolio declined 12% year-over-year to $5.4 billion, while the Growth Portfolio surged 18% to $6.9 billion. Overall sales rose 3%—modest growth, but the trajectory suggests BMY’s next-generation treatments are beginning to offset losses in its older lineup. Reflecting this confidence, management raised its full-year revenue guidance in its latest earnings report.
Beyond its internal pipeline, BMY is also pursuing strategic acquisitions to bolster long-term growth. Last month, the company announced plans to acquire Orbital Therapeutics, a privately held biotech focused on RNA-based medicines designed to reprogram the immune system. While the payoff from this deal remains to be seen, it underscores management’s commitment to expanding into innovative therapeutic areas.
Valuation remains one of BMY’s strongest points. Despite near-term headwinds, the stock trades at just 7x 2025 earnings estimates—making it not only the cheapest among these pharma peers but also less than one-third the valuation of the S&P 500 (SPX). With sentiment already subdued and much of the bad news seemingly priced in, downside risk appears limited, while upside potential could be significant if newer drugs or acquisitions gain traction.
BMY also stands out as a top-tier dividend stock, offering a robust 5.4% yield—well above both Merck and AbbVie. The company has paid a dividend for 36 consecutive years and increased it for 17 straight years. Crucially, this payout is well-supported by fundamentals, with a payout ratio of under 40%, meaning BMY’s dividend strength is built on a solid footing rather than financial stretch.
Taken together, Bristol-Myers Squibb offers a compelling mix of deep value, income stability, and pipeline potential. Its low valuation, high yield, and promising Growth Portfolio position it as a strong candidate for investors seeking both defensive income and long-term recovery potential.
Is BMY a Good Stock to Buy?
BMY earns a Hold consensus rating based on five Buys, 11 Holds, and one Sell rating assigned in the past three months. The average BMY stock price target of $51.57 implies 13% upside potential from current levels.
Backing Bristol-Myers Over Merck and AbbVie
In a market where prices and valuations across most sectors have surged, Merck, AbbVie, and Bristol-Myers Squibb stand out as rare pockets of value. Each of these large-cap healthcare names offers investors a compelling blend of attractive valuations, defensive business models, and dividend yields that comfortably exceed the market average. For investors seeking stability, income, and downside protection amid stretched stock prices elsewhere, these three pharma giants present strong opportunities.
While I remain bullish on all three, AbbVie ranks as my least favored pick due to its relatively higher valuation and lower yield. By contrast, Bristol-Myers Squibb is my top choice—it’s the cheapest of the group, offers a robust 5.4% yield, and has meaningful turnaround potential through its expanding Growth Portfolio.