A Pair of PowerRatings Upgrades for Investors: GSK, LH

If you have spent any time at all with our Long Term PowerRatings over the past few months, then you know that stocks with medical and/or pharmaceutical exposure have been among those with highest marks for both reliability and performance compared to the average stock.

Regardless of what the economists and market pundits say, we have found that stocks in certain groups continue to receive high Long Term PowerRatings. More often that not, these stocks have been in the category of "recession beaters" - stocks from companies whose products or services tend to be in demand fairly consistently regardless of the economy.

While these companies- which come from industries ranging from utilities to personal products to healthcare and pharmaceuticals - tend to have consistent results, the stocks of these companies tend to fall in and out of favor among investors. When times are going well and the economy is growing, "recession-beater" stocks tend to be all but forgotten by investors, leading them to sell these shares and to buy shares of growth companies in fields like technology and finance.

However when the going gets tough, the tough get going toward stocks of companies that can withstand a slowdown in economic growth. It is not that these companies suddenly become more profitable - often their profits are impacted negatively, as well. The difference is that while other companies are losing a lot of money and seeing their profits fall dramatically, recession beater companies tend to be losing less money and tend to face less severe profit shortfalls.

So it is little surprise to see among our PowerRatings Upgrades for today a pair of stocks with exposure to these "recession-beater" industries. Let's take a closer look.

Glaxosmithkline PLC (GSK@GSK | Quote | Chart | News | PowerRating) is a member of the Major Drug Manufacturers industry group, an industry group that includes such high Long Term PowerRatings stocks as Pfizer (PFE@PFE | Quote | Chart | News | PowerRating) with a Long Term PowerRating of 9 and stocks like Bristol Meyers Squibb (BMY@BMY | Quote | Chart | News | PowerRating), Johnson & Johnson (JNJ@JNJ | Quote | Chart | News | PowerRating), and Eli Lilly (LLY@LLY | Quote | Chart | News | PowerRating) all of which share Long Term PowerRatings of 8 with Glaxosmithkline.

Stocks with Long Term PowerRatings of 8 have been higher one year later more than 74% of the time, according to our research looking at stocks from 1995 through 2007. 8-rated stocks have also tended to gain, on average, 17% in a year's time. Both of these statistics compare favorably to the average stock, which has been higher one year later less than 68% of the time and gained between 12 and 13% after one year.

Glaxosmithkline has a P/E of 12 and is currently trading in the lower half of its 52-week range of, roughly, $55 to $40.

The other stock in today's report is a part of the Medical Laboratories and Research industry group, and is the highest rated stock in this 10-rated industry group.

Industries with PowerRatings of 10, by the way, have been among the best places for stocks to be. 10-rated industries have produced average annualized returns of more than 35% from 1995 to 2007. Compare this to the average industry group, which produced average annualized returns of 14.61% over the same time period.

The stock in question is Laboratory Corporation of America (LH@LH | Quote | Chart | News | PowerRating) which, like Glaxosmithkline, has a Long Term PowerRating of 8.

Laboratory Corporation of America is an independent clinical laboratory and offers a wide variety of testing services from routing testing to the diagnosis of disease. The stock has a P/E of 16.60 and is trading in the lower half of its 52-week price range of $82.32 to $65.13.

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David Penn is Senior Editor at PowerRating.net.