Summary
Merck has been one of the best-performing large caps since volatility returned in October.
I argue this is the results of prudent strategy and wise use of resources from back when the stock was underperforming.
Keytruda keeps getting new approvals. Merck has extremely low leverage, and is generally seen as a safe stock, which could help it attract more capital if volatility intensifies.
Even if the stock falls amid wider market stresses, it should fall less than its peers and much less than more economically sensitive stocks.
Can Merck (MRK) help stabilize your portfolio in the current market stress? Let’s take a look. The pharma giant has been doing spectacularly well since volatility returned, and has barely felt the ongoing market lurches. Look at a 1-year chart of Merck and you’d never guess that the broader market has been teetering violently.
Healthcare stocks in general continue to be a significant bright spot amid the gathering atmosphere of dread surrounding equities. Unfortunately, the positive returns for biotechnology stocks proper have been few and far between, as this industry has been the biggest laggard in the Healthcare sector, while the pharmaceutical industry has outperformed.
Stocks like Merck are generally considered defensive, as they have less exposure to economic cycles unlike financials, energy, and basic materials. Unlike other companies though that are mostly bought as names well-recognized and then ignored by the vast majority of traders, the healthcare industry has a captive audience with minimal alternatives, which makes its revenues more stable.
