A graph from the May 2008 issue of Harvard Business Review tells a story about the dumbing down of the global economy.

From an article, Rebuilding the R&D Engine in Big Pharma [subscription required] the graph shows the total shareholder returns for various industries in two time periods: from 1985 to 2000 and from 2001 to 2007. Here are three of the leading sectors from 1985 to 2000 (average annual shareholder returns are in parentheses):

• Pharmaceuticals (20.0%)
• Financials (18.8%)
• IT (17.4%)

Between 2001 and 2007, three of the leading sectors were:

• Energy (15.2%)
• Materials (14.3%)
• Financials (7.0%)

"Although Pfizer (NYSE: PFE) recently posted an 18% drop in its first-quarter earnings, I remain a long-term bull on the shares," notes Nilus Mattive in the income and growth oriented Dividend Superstars.

"Results were hurt by tougher generic competition for the company's blood-pressure drug Norvasc and allergy treatment Zyrtec. Pfizer pulled in $0.41 a share in the quarter, but would have earned $0.61 excluding costs associated with two acquisitions.

"A lot of investors are treating the poor earnings as a death knell for the company, especially since Lipitor - PFE's biggest product - will also lose patent protection in 2010. However, I've watched countless drug stocks go through these cycles before, and I continue to believe it's smarter to buy when things look the worst.

"This is still the world's largest drug company ... it still delivers big, fat dividend checks ... and it is making strong moves to reorganize its operations and focus on new drug development. For all those reasons, I remain positive on the shares."

Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.

For 25 years, Steven Halpern, editor of TheStockAdvisors.com, has surveyed the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is one of 100+ ideas in the Best Stocks for 2008 report.

"My favorite speculative stock for 2008 is Toronto-based Biovail (NYSE: BVF)," says Nilus Mattive, editor of Dividend Superstars.

"The company makes branded and generic drugs that are delivered orally. It used to concentrate on research & development for other companies, but lately it's become more of a fully integrated pharmaceutical concern.

"Some of its products are marketed and sold by other companies -- a good example is its pain medication Ultram ER, which is marketed by Johnson & Johnson.

"Investors have punished Biovail because of development setbacks in BVF-033, one of the company's most promising compounds. The FDA issued a non-approval letter, and more recently said it would not be examining newly submitted data until April. Biovail is also dealing with intensifying generic competition in other product lines.

Merck & Co. Inc. (NYSE: MRK) opened at $51.58 Thursday. So far today the stock has hit a low of $50.25 and a high of $52.26. As of 11:55 a.m., MRK is trading at 51.90, down 0.46 (-0.9%).

After hitting a one-year high of 55.14 in May, the stock has been trading within a $5 range over the past three months. The company and its private partner Neuromed announced yesterday evening that they have abandoned development of chronic pain drug MK-6721 because the drug candidate "did not demonstrate characteristics necessary to advance the compound further in development." Technical indicators for MRK are bearish with minor improvement, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bearish hedged play on this stock, I would consider a September bear-call credit spread above the $55 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk and leverage returns. For this particular trade, we will make a 19.0% return in just 6 weeks as long as MRK is below $55 at September expiration. MRK would have to rise by 6% before we would start to lose money. Learn more about trades like this one here.

MRK has never been above $55 for more than a day in the last twelve months, and the stock has shown some resistance around $53 recently. This trade could be risky if the stock breaks through the $55 level where it topped out in June, but the series of lower highs since then suggests a slightly bearish trend.

Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in MRK.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Gilead Sciences, Inc. (NASDAQ: GILD) is a favorite speculative idea for 2007 from Bill Martin, editor of FindProfit. The advisor explains, "Gilead is best known as a biopharmaceutical company with a leading HIV treatment franchise (Viread, Truvada, and Emtriva).

"Gilead is also a player in the fungal infection area, with treatments for chronic hepatitis B and influenza. Gilead's Tamiflu product is licensed to Roche, which produces and markets the product. The company has had a wonderful growth run in recent years, and now commands a $30 billion market cap.

"Trading just above 25 times 2007 earnings estimates, the stock is obviously not a bargain on the surface, but we believe that the stock remains a compelling investment opportunity, with several key drivers in hand.

"Foremost, Gilead's HIV franchise is truly best-in-class, and recent advances (including unique 'one-pill-a-day' regimes) and international expansion should power the company to double-digit growth in the coming years. Also two recent acquisitions (Myogen for $2.5 billion and Corus for $330 million) have materially improved GILD's pipeline, which was previously looking somewhat barren in the medium term.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Elan Pharmaceuticals (NYSE: ELN) is the top speculative stock for 2007 from Ken Kam. The editor of Marketocracy's Marketscope, explains, "Last year, I also chose Elan as my top pick because I thought their multiple sclerosis drug, Tysabri, would be approved for sale again.

"It was, but it didn't happen until July. Further, the FDA then required additional testing. This slowed down the sales that I had expected and led to disappointing sales in the third quarter. However, I think this delay was a speed bump, not a brick wall. Thus, the growth I thought would occur in 2006 I now think we'll see in 2007.

"Over the next 12 months, I think Elan's price will move up as Tysabri sales accelerate in the U.S. and Europe. In addition, Elan just filed today for approval to use Tysabri to treat patients with Crohn's disease -- a patient population that may ultimately double Tysabri's sales potential.