While there is deep uncertainty about how politics will affect the health care sector in the new year, analysts seem excited about some opportunities in pharmaceuticals, though their stock picks are mixed.
"Right now we're recommending big pharma stocks," Morningstar analyst Damien Conover said by phone Monday. "It's more of a industry allocation than a stock specific recommendation."
Jefferies analyst Jeffrey Holford's view on 2017 for health care is a little less positive, but nonetheless makes room for several catalysts in the sector.
"The sector continues to have a strong R&D catalyst set for 2017, with further advances expected in immuno-oncology, hematology, hemophilia and breast cancer in particular," Holford wrote in a note. "2017 should also be a rich year for M&A, with multiple small to mid size bolt-on deals expected as well as potentially some more defensive consolidation within the sector."
Ashtyn Evans, analyst at Edward Jones, said she sees companies with specific traits as those being most successful in 2017.
"In general we're thinking the companies that will be best positioned will be ones with geographic, payer and product diversification," Evans said by phone Monday.
Where analysts are mixed, though, is in recommending what stocks to buy.
Holford upgraded Bayer (BAYRY) - Get Report and Bristol-Myers Squibb (BMY) - Get Report to a buy, and downgraded Merck (MRK) - Get Report to an underperform rating Monday, while peers disagreed with his choice.
"We continue to bias our stock selection towards the cheaper growth names," Holford wrote in a note, stressing that price to earnings growth is a "key" valuation tool.
Meanwhile, Conover said he sees Sanofi (SNY) - Get Report , Bayer and Eli Lilly (LLY) - Get Report as offering the best value in the sectors as investors overlook their fundamental strength and under-price their stocks as a result.
And Evans' favorite stock in the sector was Merck, which she noted has over half of its sales outside the U.S., which will alleviate pricing pressure others may feel within the U.S. as a result of government intervention despite the end of the Obama administration's efforts on that front. Merck's animal business, too, will likely help with diversification.
TheStreet's Jim Cramer voiced his support of the stock on CNBC's "Fast Money Halftime Report" Monday in response to Holford's decision to downgrade.
"Merck has been very, very circumspect over this kind of, you know, it's not a Teva (TEVA) - Get Report it's not a Mylan (MYL) - Get Report ," Cramer said. "It's the old Saint Merck, I think that they're being very responsible. I think that Keytruda is a gigantic drug. I would go the other way on this."
Merck fell 2% on the downgrade Monday, closing at $61.14 per share.
This isn't the only stock over which Evans and Holford disagreed.
"Companies that don't spend as much on R&D or aren't as diversified would be names that we wouldn't recommend putting new money into," Evans said of the company.
Abbvie dipped only slightly Monday, closing down 0.2% to $62.22 per share.