Health and Healthcare

Five Top Health Care Names From RBC to Buy Now

The intense analysis of quantitative managers may seem like drudgery, but it can turn up absolute gems for investors looking for solid long ideas. In fact, firms like RBC use as much as 18 years of monthly data, scouring stock information for cash flow valuation metrics, which are the most significant across a majority of the S&P’s 1,500 sectors. According to their work, the RBC proprietary final sales metric was among the most significant of all factors in all of the S&P 1,500 sectors except one. Final sales help track what they call “quality sales.” This can be significant if the economy has the second-half pickup many on Wall Street see coming.

Health care is the third top-performing sector this year after utilities and energy. We highlight the five top names that were added to the top quintile at RBC.

Abbott Laboratories (NYSE: ABT) is a top pharmaceutical name to make the RBC top quintile. The company recently reported better-than-expected quarterly earnings, but combined sales of its nutritional products, medical devices and generic medicines were slightly below Wall Street expectations. The company earned $375 million, or $0.24 a share, in the three months ended March 31. That compared with $544 million, or $0.34 per share, in the year-ago quarter, when Abbott took charges for licensing and acquisitions. The company pays shareholders a 2.3% dividend. The Thomson/First Call price target is set at $41.21. Shares closed Monday at $38.37.

Haemonetics Corp. (NYSE: HAE) is a global health care company providing innovative blood management solutions for its customers. Together, the company’s devices and consumables, information technology platforms and consulting services deliver a suite of business solutions to help customers improve patient care and reduce the cost of health care for blood collectors, hospitals and patients around the world. The company will report earnings this week. The consensus price target is $40.44, and Haemonetics closed Monday at $31.19.

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Hologic Inc. (NASDAQ: HOLX) is expected to post earnings that are above expectations, and many on Wall Street are very positive on current executive leadership from CEO Stephen MacMillan. The company’s businesses face a number of macro challenges that will not be “quick fixes,” and a turnaround will require patience. Analysts do see a path to greater value creation emerging and cite management’s commitment to more shareholder-friendly capital redeployment. That may include debt pay-down and share buybacks. The consensus price target is $22.66. Hologic closed Monday at $20.65.

Salix Pharmaceuticals Ltd. (NASDAQ: SLXP) develops and markets prescription pharmaceutical products and medical devices for the prevention and treatment of gastrointestinal diseases. Its strategy is to in-license late-stage or marketed proprietary therapeutic products, complete any required development and regulatory submission of these products and commercialize them through the company’s 500-member specialty sales force. The consensus price target is $119.73, and the stock closed Friday at $108.72.

Zimmer Holdings Inc. (NYSE: ZMH) rounds out the top new health care adds. The company sells orthopedic reconstructive, spinal and trauma devices, biologics, dental implants and related surgical products. The company has one of the highest net operating margins in its field at 14.86% and spiked up huge late last week when it announced its purchase of Biomet for $13.4 billion. Investors are paid a 0.9% dividend. The consensus price target is $110.45. Zimmer closed Monday at $98.45.

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Quantitative data is no guarantee of stock success, as there are many volatile pieces of data that cannot always be factored in. Headline risk, among others can prove huge. However, when going through years of data and statistics, analysts can get a solid idea of which names can start trending up. That is the time to buy the stock.

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