Large pharmaceutical companies like Merck (MRK) are to be avoided at all costs in this market. There is simply no reason to own the stocks. Those who have been bidding up shares have done so in pursuit of a dividend. All that buying has made the stocks expensive.
With respect to Merck, there is little innovation on the horizon and with previously patent-protected drugs coming off-line, there is a risk for profits to fall. At the moment analysts expect Merck profits to be flat in 2014. At current prices, shares trade for 13.5 times 2014 estimated earnings. Don’t be fooled by the near 4% dividend. This one is likely to lag the market in the short term.