2 Dow Safety Stock for Volatile Market: S&P PM

As the Dow Jones Industrial Average (DJIA) index experiences a period of heightened volatility, healthcare stocks have proved relatively immune to the wider market swings. Healthcare players Pfizer Inc. (PFE), UnitedHealth Group Inc. (UNH) and Merck & Co., Inc. (MRK), all members of the blue chip index, remain within short reach of their 52-week highs, while the DJIA has fallen 5.8% from its own as of Friday afternoon. Now, one market watcher sees bigger gains ahead for Pfizer and UnitedHealth in particular, thanks to strong earnings growth prospects and the stocks' attractive valuations. 

Buy Pfizer, UnitedHealth on Above-Average Earnings Growth, Valuation

In an interview with CNBC's Trading Nation on Wednesday, Erin Gibbs, portfolio manager at S&P Global Market Intelligence, highlighted Pfizer and UnitedHealth as attractive healthcare plays for investors seeking safer bets amid broader uncertainty. 

"Pfizer and UnitedHealth both have really above-average earnings growth coming into next year, about 13 percent, and even though they're trading at 52-week highs, there's still a pretty reasonable valuation," said Gibbs.

With a forward price to earnings ratio at 19, UnitedHealth stock trades above the average S&P 500 company's 16 times multiple, while Pfizer shares trade below at just 14.5 times. Both of the healthcare industry leaders have seen their stocks outperform the broader market this year, with a 20.3% return for UnitedHealth and a 23.3% gain for Pfizer outpacing the S&P 500's 3.6% increase. 

As for Pfizer in particular, Gibbs is upbeat on the pharmaceutical giant's recent restructuring initiative, indicating that the company could benefit from another sale of a portion of its generic drug pricing business. 

"Our second favorite would also be with UnitedHealth just because they've had really good organic growth membership," said the market watcher. 

D.C. Puts Fight with Pharma on the Back Burner

Miller Tabak equity strategist Matt Maley chimed in on the CNBC segment, noting that the larger healthcare space should see conditions improve as Washington, D.C. focuses on other matters. While Hillary Clinton honed in on high drug pricing and criticized big pharma back in 2015, lawmakers currently seem less concerned with high drug prices. While President Donald Trump called for political action to reduce prices in May, Maley noted that his statement "didn't have much teeth at all." 

"As we've learned, the president focuses on one issue at a time. He started with Obamacare, then it was taxes and then it became, of course, trade so that theme seems to be pushed to the side. I think that's helped the group a lot," added the strategist.