"In addition, the specter of health-care reform has investors worried about future profits. Fortunately, the news is not all bad. The wind may have shifted, but the boat remains seaworthy.

"On the surface, the numbers are ugly - five of the six industry indexes within the S&P 1500 health-care sector have declined over the past 12 months.

"But all six indexes outperformed the broader S&P 1500. Defensive is a relative term. And relative to the 44% decline in the S&P 1500 Index over the last year, most health-care stocks were fairly defensive.

"The Obama health-care plan promises to cut insurance costs for consumers and make coverage available for those who cannot afford it.

"The plan calls for limiting the profits of managed-care providers and making it more difficult for drug companies to defend patents. The final version of any legislation is likely to be more business-friendly than the current proposal, but the risks are real.

"Reform concerns aside, many health-care companies seem capable of continued growth. This year, consensus estimates project double-digit profit growth from the average biotechnology and health-care services company, with no other group topping 8% growth.

"However, the market expects a return to broad-based growth in 2010, with all subindustries managing at least a 5% revenue increase and 10% gains in per-share profits.

"AstraZeneca was one of the drug industry's top performers last year, with the shares down just 4%, versus a 21% drop in the S&P 1500 Pharmaceuticals Industry Index.

"Wall Street expects per-share-profit growth of less than 1% this year, but the consensus has risen 3% over the last month. At just seven times estimated 2009 earnings, AstraZeneca shares trade at a 46% discount to the five-year average forward valuation of 13.

"The new year has delivered mixed news for one of AstraZeneca's key products. A study found that many antipsychotic drugs - including AstraZeneca's schizophrenia treatment Seroquel (sales of $4.45 billion, or 14% of total revenue in 2008) - pose heart risks.

"But in January, the Food and Drug Administration granted Seroquel six more months of exclusivity, extending the patent until March 2012.

"With more than 30 projects in late-stage clinical trials, AstraZeneca stands poised to reap the rewards of research-and-development spending that represented about 16% of sales over the last six years. AstraZeneca is a Buy and a Long-Term Buy.

"In 2008, sales at Johnson & Johnson grew 4% as gains in consumer products (up 11%) and medical devices (up 6%) offset a 1% decline in drug revenue. This year, expectations are lower, as J&J expects sales flat to down 1% and the consensus projects a 3% decline.

"Acquisitions should help support the top line. J&J heightened its presence in emerging markets by picking up Dabao, a Chinese cosmetics maker. The $1.1 billion acquisition of breast-implant maker Mentor in January strengthens J&J's move into products for cosmetic and reconstructive surgery.

"The drug pipeline is promising. J&J filed five new pharmaceutical compounds with the FDA in 2008 and plans to submit several more over the next two years.

"HIV drug Intelence gained preliminary approval in January under an accelerated review program, and J&J has asked for full approval to market to patients who have stopped responding to other medication. J&J is a Focus List Buy and a Long-Term Buy."

Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.