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Jefferies' 6 Best Health-Care Stocks for 2011

Stocks in this article: JEF PFE STJ BIIB VRX VAR CBST

BOSTON ( TheStreet) -- Investment-bank Jefferies included six U.S. health-care stocks in its 2011 Top Picks List. All are expected to deliver double-digit percentage gains over the next 12 months. Health-care stocks have fallen out of favor recently as economic acceleration spurred a migration into riskier assets. But, with an aging baby-boomer population and increasing medical spending, the fundamental outlook for the health-care sector remains bright.

6. Pfizer (PFE) is the world's largest pharmaceutical company, having purchased Wyeth in 2009.

Pfizer reported quarterly results yesterday, posting 47 cents of adjusted earnings, which exceeded analysts' consensus target by 2.4%. Its top-line tally of nearly $18 billion beat expectations by 3.9%. Pfizer's stock rallied as much as 6% intraday on the solid report. Pfizer has been a consensus value pick for more than a year. It is perhaps the cheapest Dow stock, trading at a forward P/E of 8.2 and a book value multiple of 1.7, 31% and 73% peer group discounts.

Jefferies had a positive reaction to Pfizer's quarterly report. Although the drug-maker's 2011 guidance missed researchers' consensus, it sees share repurchases and a decrease in research and development expenses as catalysts for the stock. Furthermore, 2012 earnings guidance came in ahead of Jefferies' estimate. Pfizer has solidified its position as the pharmaceutical leviathan and a focus internally, rather than on further acquisition activity, should improve operating results going forward. Jefferies' $22 target suggests a 2011 return of 15%.

Bullish Scenario: JPMorgan expects Pfizer to rise 25% to $24.

Bearish Scenario: Citigroup predicts a fall of 12% to $17.

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