Don Nesbitt, senior portfolio manager at F/m Investments, joins BNN Bloomberg to share his Hot Picks in healthcare.
Dividend-focused large caps in the health care sector are drawing renewed interest as earnings growth and valuation discounts converge. A portfolio manager says several major names now offer compelling cash flow, attractive pricing and multi-year expansion potential.
BNN Bloomberg spoke with Don Nesbitt, senior portfolio manager at F/m Investments, who outlined his outlook for AbbVie, Pfizer and Medtronic. He pointed to product-cycle strength, pipeline progress and valuation gaps that he believes support dividend stability and future upside.
Key TakeawaysHealth care continues to offer strong earnings growth while trading at a valuation discount to the broader market and tech sector.AbbVie’s pipeline momentum and post-Humira transition underpin earnings durability and dividend-growth potential.Pfizer’s low valuation, post-COVID normalization and pipeline depth support its high yield and recovery outlook.Medtronic’s medical-device portfolio, steady R&D investment and pricing discount position it for consistent long-term growth.All three companies have recently beaten earnings expectations, reinforcing confidence in their cash flow and dividend sustainability.
Don Nesbitt, senior portfolio manager at F/m Investments Don Nesbitt, senior portfolio manager at F/m Investments
Read the full transcript below:
ANDREW: Time for Hot Picks. Our guest is focused on the health care sector. We’re joined by Don Nesbitt, senior portfolio manager at F/m Investments. Thanks very much indeed for joining us. Start off with AbbVie. Can you tell us why this one catches your eye, please?
DON: Sure, and thanks for having me here. Let me back you up quickly on why health care in general, and that’s because you get pretty good earnings growth at a reasonable valuation. Obviously the hot story has been AI tech for the last couple of years, and rightly so, because it’s got the growth. But the health care industry in the S&P 500 is expected to grow about 20 per cent annually over the next five years. Compare that to the tech sector’s 22.5 per cent. But the health care sector is selling at a relative discount of about 20 times those forward earnings. The S&P 500 is at about 22 times, and the tech sector is around 28 times. So when you look at the PEG ratio of this sector relative to the others, it’s actually the most favourable — in other words, you’re getting the best growth for the lowest price. That’s why we like the sector right now.
Going into one of the names you mentioned, AbbVie — a large biopharmaceutical — it fell out of favour over the last couple of years because it lost exclusivity on its blockbuster drug Humira. But the other drugs coming through the pipeline are doing well. This stock has about 11 per cent compounded annual growth. It’s trading at only about 16 times earnings, roughly a 30 per cent discount to the industry as a whole. And as you mentioned, it’s yielding three per cent. So this is a great opportunity to get what we call a dividend-growing stock.
ANDREW: And they are working on obesity drugs. I guess you have to these days if you’re a pharma company.
DON: Yeah, everybody is. And that’s a good segue into our next stock, which is also a large pharmaceutical — Pfizer. Pfizer is suffering from the post-COVID hangover. They did very well with the vaccine during COVID, but then those sales began drying up, and the market has priced it very cheaply, at something like eight and a half times earnings. But because the stock is so cheap, you’re getting a yield of almost seven per cent. And as you just mentioned, they recently made an acquisition to get into the weight-loss drug area. I would look at that as optionality. They’ve got a lot of other good products in the pipeline, solid earnings growth, and they’ve overcome the COVID hangover, so to speak. It represents good growth, and you’re getting paid to wait at almost seven per cent.
ANDREW: That’s a big yield. Would the company be inclined to — well, I guess they would be very loath to cut it. But you hear this argument: if you’re not getting rewarded for a dividend, why pay such a high one?
DON: This is almost an anomaly, that you actually have this potential growth and you’re getting paid for it. The cash flow is solid. The other thing that has happened over the last four quarters is that all three of these stocks have beaten their earnings estimates, which is something we like to see. But Pfizer in particular has done a really good job because of the low expectations around the stock. We think this could continue. Again, I think the obesity play is more of an option, and the focus should be on its regular drugs and pipeline.
ANDREW: And then finish off with Medtronic, if you would. What do they do, and why do you like the look of the stock?
DON: Medtronic is in a bit of a different industry — medical devices. While you might not know the name, you’re likely familiar with their flagship product, pacemakers. They’re very involved in that cardiovascular area, but they’re also moving into other areas such as surgeries and producing medical devices for that. They’ve got very strong growth and strong R&D — they plow back almost 10 per cent of their sales into research and development. The yield isn’t quite as high, a little under three per cent, but again, it’s trading at about a 30 per cent discount to its peer group. You’re going to get growth, and you’re getting paid to wait for it.
ANDREW: Don, thank you very much indeed for joining us.
DON: Thank you, Andy, and have a great day.
ANDREW: You too. Don Nesbitt, senior portfolio manager at F/m Investments.
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This BNN Bloomberg summary and transcript of the Dec. 11, 2025 interview with Don Nesbitt are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.