Goldman Sachs Picks 4 Big Pharma Stocks to Buy

Every day, Wall Street analysts upgrade some stocks, downgrade others, and "initiate coverage" on a few more. But do these analysts even know what they're talking about? Today, we're taking several high-profile Wall Street picks and putting them under the microscope. Investment banker Goldman Sachs plunged back into the world of big pharma stocks this morning. Initiating coverage of seven biotech and pharmaceutical companies running nearly the length of the alphabet  from AbbVie all the way to Pfizer (NYSE:PFE)  Goldman Sachs had good news for investors:Three of these stocks Johnson & Johnson (NYSE:JNJ), Eli Lilly (NYSE:LLY), and Bristol-Myers Squibb (NYSE:BMY) - are buys, and a fourth looks like such a great bargain that the analyst actually calls it a "Conviction Buy."Here they are for you - and here's what Goldman has to say about each of them.Easily the largest of Goldman Sachs' pharma picks today, Johnson & Johnson tips the scales at $370 billion in market cap and $81.6 billion in annual revenue. (J&J is also the most expensive, with a price-to-earnings ratio of 25.8.) But Johnson & Johnson is worth the price premium, argues Goldman Sachs in a note covered today on StreetInsider.com (subscription required). Although earnings declined 14% last quarter, the company is poised to turn around its fortunes on the strength of its diversified portfolio of consumer and medical products and devices.What's more, in contrast to other large pharmaceutical companies, Goldman Sachs sees Johnson & Johnson as having the least exposure to government Medicare and Medicaid spending of any big pharma stock the analyst covers. As the 2020 presidential race gets underway, and Medicare for All proposals get put under the spotlight, Goldman Sachs worries that discussions of changes to healthcare policy (and cuts to healthcare spending) could pressure healthcare stocks. In such an environment, diversification away from government healthcare programs could become a big plus for Johnson & Johnson.