As one of the top sectors in the S&P 500 in 2014, health care has one factor that almost always makes it a reasonably safe place to invest in. The United States and other major developed nations have an aging population, and while that population is living to be older than ever before, they need care, coverage and, most of all, medicines.
24/7 Wall St. reviewed the new Credit Suisse Top Picks for 2015 report, and here are five of the top health care picks: Aetna Inc. (NYSE: AET), Bristol-Myers Squibb Co. (NYSE: BMY), Cardinal Health Inc. (NYSE: CAH), Community Health Systems Inc. (NYSE: CYH) and Illumina Inc. (NASDAQ: ILMN).
Aetna is one of the nation’s leading diversified health care benefits companies, serving an estimated 44 million people while offering a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental, behavioral health, group life and disability plans and medical management capabilities. Its stock trades at just touch over 13 times 2015 estimated earnings.
Aetna investors are paid a 1.05% dividend. The Credit Suisse target for the stock is $103, and the Thomson/First Call consensus price target is $103.61. Aetna closed Thursday at $96.59 a share.
This large cap pharmaceutical stock also makes the top picks list at Credit Suisse. In late December, the U.S. Food and Drug Administration (FDA) granted accelerated approval to Opdivo (nivolumab), a new treatment for patients with unresectable (cannot be removed by surgery) or metastatic (advanced) melanoma who no longer respond to other drugs. The analysts are bullish on the drug and look for updates and launch information to be forthcoming. Like other large-cap pharmaceutical companies, Bristol-Myers is often rumored to be looking for an accretive and pipeline filling acquisition.
Bristol-Myers investors are paid a 2.45% dividend. Credit Suisse puts a $68 price target on the stock. The consensus target is much lower at $63.41. Shares closed trading Thursday at $60.23.
Another top company in the health care sector that makes the top picks list, it distributes branded and generic pharmaceutical, over-the-counter health care, specialty pharmaceutical and consumer products to retailers, including chain and independent drug stores and pharmacy departments of supermarkets and mass merchandisers, as well as to hospitals and other health care providers.
The Medical segment distributes a range of medical, surgical, and laboratory products to hospitals, ambulatory surgery centers, clinical laboratories, physician offices and other healthcare providers, and it offers supply chain services, including spend, distribution and inventory management services to health care providers. With big stock buyback plans still in effect, the stock is a solid long-term holding.
Cardinal Health investors are paid a 1.62% dividend. The Credit Suisse price target is $97, and the consensus target is $92.21. Shares closed Thursday trading at $84.43.
Community Health Systems
Community Health Systems is a favorite this year at Credit Suisse, and it is well liked across Wall Street. Analysts expect that coverage expansion under Affordable Care Act (ACA) will provide a substantial boost to earnings in 2015 and beyond. The company’s large asset base provides geographic diversification and scale advantages. This is one of the stocks that the Credit Suisse team sees as most levered to the states where Medicaid expansion could be the greatest, and more exposed to health care reform than almost any other company in the firm’s coverage universe.
The Credit Suisse price target of $66 is higher than the consensus price objective of $62.61. The stock closed Thursday at $47.90 a share.
This Credit Suisse top pick in life sciences develops, manufactures and markets life science tools and integrated systems for the analysis of genetic variation and function in most parts of the world. The company’s products include sequencing platforms that are based on its SBS technology and designed to meet the various demands of a range of sequencing applications, as well as array platforms consisting of HiScan and iScan systems array scanners, which support the imaging of array-based genetic analysis products.
Illumina is the early leader in a growing genetic sequencing market that some analysts predict could reach $20 billion annually in the near future. Illumina has a dominant 70% market share in the industry and its development of groundbreaking technologies, such as the $1,000 human genome, have been game changing. Illumina’s growth in the early days of the gene sequencing market have the company poised to ride its innovation to years of potential success.
The Credit Suisse price target for the stock is $230. The consensus target is set lower at $224.75. Shares closed on Thursday at $194.51.
The Credit Suisse top health care picks range from very conservative to very aggressive, so there is a stock for almost every portfolio. While the sector may not duplicate last year’s stellar returns, investors can feel confident buying here for the long term.
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