Well before this week's Massachusetts electoral upset, Wall Street analysts were resuming their bullishness on health-care stocks.

But to reach Wall Street analysts' newest price targets, some big stocks in health care or pharmaceuticals would need to add another 20% or so to already lofty gains since July. That's a pretty tall order.

Wednesday, Merck & Co. Inc. (MRK), Bristol-Myers Squibb Co. (BMY) and Novartis AG (NVS) snared investment-rating upgrades from Miller Tabak & Co. The move, which boosted the stocks to "buy" from "neutral," was premised on a number of factors including what the firm considers to be the companies' strong product pipelines. Miller Tabak had also been waiting for a clearer signal from Washington before upgrading, health-care strategist Les Funtleyder wrote. Others have been eyeing what they expect will be unusually strong earnings this year.

Equity researchers started making more longer-term favorable calls on the sector over the last few months, but the stocks were already rising substantially. Merck, Bristol-Myers and Novartis have each risen anywhere from 23% to 46% in the last six months, compared to the S&P 500's 20%.

Despite the perception that Washington has held health stocks back, the iShares Dow Jones U.S. Health Care Sector Index (IYH) is up about 24% over the last six months, trading off 0.9% recently at 66.10.

The stocks of two of the three big pharmaceutical companies upgraded Wednesday are only slightly below analysts' median price targets, according to Thomson Reuters Corp. (TRI). Merck and Bristol-Myers shares would need to add about 20% by next year to hit Miller Tabak's new targets, during a year when many equities strategists aren't expecting a repeat of last year's market surge.

Viewed from another vantage, all three big pharma stocks upgraded Wednesday are still under their 2007 highs, in one case by about half.

For some equities researchers, it's the same lower expectations for the rest of the market that could drive investors to health-care stocks.

"We're looking for the safer, more predictable stories to do better in 2010, and health care is safer and more predictable," James Wilson, director of research for San Francisco-based JMP Securities, says.

Wilson's top two sector picks: health care and medical devices along with technology, followed by budget retail and home building.

One reason that's significant: JMP is coming off an especially strong performance last year, with equities ratings across sectors returning about 34% in 2009, according to research firm Investars. JMP's performance was among the top 5 equity researchers in its Investars category, and it would likely need a strong performance from health-related stocks to repeat those numbers.

A look at JMP's highest health and medical-technology choices shows a similar trend as the big pharma stocks above: 4 of the 6 companies' shares have risen in the range of 31% to 57% in the last six months.

JMP's top picks in the sector are small-molecule drugmaker Ardea Biosciences Inc. (RDEA); pharmacy benefit manager Express Scripts Inc. (ESRX); life sciences company Genomic Health, Inc. (GHDX) hospice-care provider Odyssey Healthcare Inc. (ODSY); biomedical device maker Medtronic, Inc. (MDT), and drug developer Vivus, Inc. (VVUS).

Only Ardea's shares are below their price six months ago. Genomic Health is up about 9%.

In other words, most of the stocks would need to go on a tear all over again in 2010.

At least for now, some of the high hopes for health stocks have run into jitters. Managed-care stocks couldn't hold on to the rally they began the morning after Senate Republicans gained a filibuster to use against the president's health bill, with many fizzling by mid-morning. As of Thursday, most were following the rest of the market downward.

-By Brendan Conway, Dow Jones Newswires; 212-416-2670; brendan.conway@dowjones.com