NEW YORK ( TheStreet) -- Health-care stocks, especially drug shares, performed downright sickly in 2010. That could change this year, as some fund managers say overlooked and undervalued companies may finally provide healthy returns.

The Healthcare SPDR ETF ( XLV) rose barely 1% in 2010, compared with a 13% jump in the S&P 500 Index. The largest holdings of the Healthcare SPDR are Johnson & Johnson ( JNJ) (13.5%), Pfizer ( PFE) (11.5%) and Merck ( MRK) (9%). They all finished in the red last year, helping to make health care the worst-performing sector in the S&P 500.

Russell Croft, manager of the Croft Value Fund ( CLVFX), says some drug stocks provide stability because they're cheap, pay big dividends and have strong balance sheets. A catalyst, he says, are companies benefiting from emerging markets, where a growing middle class is able to pay for drug therapies.

Bob Auer of the Auer Growth Fund ( AUERX) says some mid-cap or second-tier pharma stocks can easily get a boost by a "new product or something exciting can move the needle."

TheStreet searched for 2011's most dynamic drug stocks with Auer and Croft.

Johnson & Johnson ( JNJ)

Johnson & Johnson is a diversified manufacturer of health-care products including pharmaceuticals, consumer products and medical devices. Due to their vast product portfolio, huge scale and the defensive nature of the industry, J&J is a relatively stable investment in any economic environment, says Croft. Half of sales come from abroad, and they will benefit from faster-growth emerging markets over the next decade.

Croft also likes the company's AAA-rated balance sheet, which is one of the strongest across any industry, with $22 billion in cash and about $12 billion in debt. J&J is in the middle of an extensive cost-cutting program that consists of consolidating pharmaceutical operations, integrating the medical-device business and improving efficiency across the entire company, which should combine to yield up to $1.6 billion to the bottom line.

"Their pharmaceutical pipeline is one of the best in the group and new products could add an estimated $5 billion to segment sales by 2013. New products will contribute over $1.5 billion to segment sales this year from launches of Stelara, Simponi, Sustenna and Nucynta," says Croft.

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