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Tickers in this Article: MRK, JNJ, PFE, WYE, SPY
Mood swings between feelings of melancholy and jubilation brought on by Dow Jones Industrial Average (DJIA) gyrations can be difficult to handle. Let's take a look at healthcare providers on the DJIA to gauge how their beta ratios have factored into stock market returns since the beginning of the year.

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Asthma Reliever
Worldwide sales of $4.3 billion for Merck's (NYSE:MRK) asthma treatment product Singulair helped the pharmaceutical maker finish 2008 with $23.9 billion in revenues and $3.42 in non-GAAP earnings per share for the full year. Although litigation surrounding Vioxx and Fosamax may continue into 2009, strong sales of its type-2 diabetes drug Januvia and its HIV inhibitor Isentress helped Merck reaffirm full-year expectations closer to the lower range of $23.7 billion, to $24.2 billion, with earnings per share (EPS) from $3.15 to $3.30. Merck's beta of 0.8 is the highest among the group mentioned. A beta of 0.8 suggests 20% less volatility than a broad index like the S&P 500. The SPDRS S&P 500 Index (NYSE:SPY) is down -14% since the beginning of the year through February 20, while Merck is down -7.57% for the same time period.

Diversification Player
Playing the safe card in the face of patent expirations and the need for new pharmaceutical products is not a part of the near-term strategic moves for Pfizer (NYSE:PFE). On January 26, Pfizer announced its intention to merge with Wyeth (NYSE:WYE) in a cash-and-stock transaction. Pfizer's Lipitor will be complimented with Wyeth's own multi-billion dollar drugs, including the antidepressant Effexor, infant vaccine Prevnar and rheumatoid arthritis fighter Enbrel. Pfizer has a beta of 0.6, suggesting the company should rise or fall 40% less than the S&P 500. Pfizer has fallen just over 22% since the beginning of the year through February 20.

Positive International Sales
Johnson & Johnson
(NYSE:JNJ) managed to increase its revenues for the full year 2008 over the prior year to $63.7 billion, enabling EPS of $4.55. Despite a drop in revenue for the fourth quarter, international sales increased 9.7%. Full-year 2009
guidance is expected to fall in the range of $4.45 to $4.55 per share. Johnson & Johnson has the lowest beta of 0.5 among the group. Johnson & Johnson has fallen just over 8% since the beginning of the year through February 20. (Explore the controversies that can surround a company's forward-looking statements in Can Earnings Guidance Accurately Predict The Future?)

Final Thoughts
A stock's beta is not a 100% guarantee of how the stock may respond to fluctuations of the S&P 500, but it is a ratio investors should note. Pfizer was the only stock mentioned above with a beta below "1" that has not outperformed the S&P 500. The take away is the knowledge that a beta below "1" can lead to less volatile returns. However, as with almost any assumption, there will always be exceptions to the rules. (To learn more about beta, be sure to read Bettering Your Portfolio With Alpha And Beta.)

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