Everybody loves to hate drug stocks, especially Merck (MRK), Pfizer (PFE) and Schering-Plough (SGP).

But not Raymond James analyst Mike Krensavage, who gets high marks in this column for guts and a willingness to zig while others on Wall Street zag. He was, after all, the guy who (other than yours truly) went as far against the grain as possible in publicly raising red flags over aaiPharma long before its flameout and bankruptcy filing.

So, now, while most brokerage analysts go out of their way to advise selling or avoiding Merck and Pfizer, Krensavage ranks both strong buys, largely the result of their cash flows.

Relative to its enterprise value, the vexing by Vioxx notwithstanding, at 11% Merck's cash flow yield is the highest it has been since 1994. It's also the highest for any company in an industry where the average cash flow yield is 4.4%. "If you have good enough cash flow, even with declining sales, you can make money on your investment," Krensavage says.

And that's before additional cost cutting, which he believes is likely. And the "most convenient way" to cut costs, he says is by doing a merger.

That's where this story gets good.

Krensavage believes Merck is an obvious partner for someone. A deal with Pfizer would be blockbuster, but it would also raise antitrust issues — especially with cross-over cardiovascular drugs. That, Krensavage believes, leaves his dream team of Merck and Schering-Plough — also on his list as a strong buy.

Word of caution: Krensavage has been chatting up this pairing for two years. (Of course, he was chatting down aaiPharma for about the same amount of time.) But he believes the time has never been better for something to happen.

A deal, for example, would fix a rift between Schering-Plough and Merck over Merck's marketing of its cholesterol drug Vytorin, in which Schering-Plough has a 50-50 stake. Then there's the cost cutting: both companies need to do more. Finally, Krensavage says this merger could instantly fill the Merck's vacant chairman's slot with Schering-Plough's Fred Hassan, whom Krensavage says would love to run a larger company.

Will such a deal happen? Beats me, but even if it doesn't, Krensavage says for investors to whom long-term isn't a day these three stocks may be just what the doctor ordered. Just remember, they looked like death in 1994, too — and look what happened!