Fired up by an erratic and treacherous equities market characterized by a swelling credit crunch, housing worries, recession fears, and extreme volatility, the quest for bulletproof stocks has not been this intense since the bloody dot-com bubble of the early 2000s.

As part of this bulletproof hunt, many jittery investors, spurred by a rash of brokerage recommendations for defensive securities, have fled to the supposedly safe health care industry. They have been theorizing that a rapidly surging worldwide population of people in their golden years will be a surefire winning investment prescription for pharmaceutical stocks.

Sounds good, except pharmaceutical shares, which have lagged the market during the last two years, are hardly potential world beaters, given the industry’s abundance of woes. Noteworthy are the shortage of new blockbuster drugs, surging generic competition, and growing efforts in Washington to rein in spiraling health care costs. In other words, drug stocks, for now at least, are partially damaged goods.

A Los Angeles money manager, Arnold Silver of A. Silver Associates, sums it up: “You can no longer indiscriminately get high on drug stocks because they’re no longer that defensive, and you’re potentially flirting with dead money.”

A veteran investment adviser, Stephen Leeb, says he agrees: Pure drug companies have become too risky unless they have something special on the horizon. On the negative side, he includes Eli Lilly because of its fading blockbuster drug potential and a struggle to grow in the high single digits. He recommends sale of the stock.

There are always exceptions to the rule, though, and Mr. Leeb figures one is Novartis, the world’s second-largest producer of generic drugs and the owner of an array of consumer products, including ex-lax and Excedrin, antacids, contact lens solutions, and topical skin treatments.

He also reckons shares of this Swiss-based drug maker, currently $49.75, will double within three years.

Pointing to Novartis’s triple-A rating, indicative of a superb balance sheet, Mr. Leeb notes the company’s three divisions — pharmaceuticals, generic drugs, and consumer products — are firing on nearly all cylinders and should be at full throttle by the end of the decade.

Importantly, Novartis’s pharmaceutical division, which accounted for 65% of last year’s $38 billion of revenues, stands out from the competition, partly because none of its major drugs faces generic rivalry for many years. In addition, he says, several potential blockbuster drugs should gain approval within two years, translating into billions of dollars worth of sales.

These potential blockbusters include an anti-cancer drug, Zometra, two drugs for hypertension, and an anti-depression drug that works like an SSRI (Zoloft, Cymbalta, and the rest, which as a group generate nearly $10 billion a year in annual sales), but without the side effects.

Mr. Leeb, who publishes several investment newsletters, is also gung ho on a couple of other health care players, both medical device makers. One is Becton, Dickinson and Company which makes a wide variety of equipment servicing the pharmaceutical, diagnostic, and bioscience markets. Products include biomarkers used to detect cancer early, syringes for diabetics, and safety-engineered methods for drawing blood.

“An exceptionally consistent growth stock” is the way Mr. Leeb describes the company, noting profits have risen through thick and thin for more than 20 consecutive years at a remarkably constant 12% to 15% a year. Despite its increasingly larger size (2007 sales: $6.3 billion), he looks for the trend to continue for the foreseeable future, sparked by the opportunity for growth as international markets become more significant. During the past several years, international earnings have grown 20% annually.

Yet another plus, he notes, is the company’s free cash yield, expected to run nearly 6% this year, which should fund aggressive share repurchases while further boosting profit growth.

Mr. Leeb expects the company’s shares, trading at $90.28, to top $100 during the next 12 to 18 months.

His other pick, C.R. Bard, Inc., produces medical devices for a wide variety of markets, including urology, in which it’s the clear leader in several applications, including catheters and related items. Mr. Leeb notes it’s significant that urological problems correlate particularly highly with an aging population, and he thinks Bard’s growth in this segment should continue to top 15%.

Bard is also a market leader in several areas of oncology, and together, urology and oncology account for better than 50% of the company’s more than $2 billion in annual revenues. This more than compensates for its relatively staid vascular and surgical stent businesses, he says.

Mr. Leeb also gives Bard high marks for its exceptional balance sheet, persistent share repurchases, and its footprint in international markets, which, though small, has been torrid of late, especially in developing countries. His price target for Bard shares, currently $97.56, is $115 within the next 12 to 18 months.

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