Health care spending in the United States is huge, and it continues to grow at a rapid pace as the population is aging, and the aging population is living longer. The demand for everything from medical devices to pharmaceuticals to biotechnology to health care information technology continues to grow, and the leaders in those areas of the market have a bright future and good upside potential for investors.
In a new report, the analysts at Jefferies are out with a synopsis of the firm’s top U.S. health care picks. With a plethora of stocks to choose from, we decided to focus in on five that are larger capitalization plays and that would work for most growth portfolios with a degree of risk tolerance. All these stocks are rated Buy at Jefferies.
This top pharmaceutical and med-tech stock has very solid growth potential. Abbott Laboratories (NYSE: ABT) manufactures and sells health care products worldwide.
The company’s Established Pharmaceutical Products segment offers branded generic pharmaceuticals to treat pancreatic exocrine insufficiency; irritable bowel syndrome or biliary spasm; intrahepatic cholestasis or depressive symptoms; gynecological disorders; hormone replacement therapy; dyslipidemia; hypertension; hypothyroidism; Ménière’s disease and vestibular vertigo; pain, fever and inflammation; migraines; anti-infective clarithromycin; cardiovascular and metabolic products; and influenza vaccines, as well as to regulate physiological rhythm of the colon.
Its Diagnostic Products segment provides immunoassay and clinical chemistry systems; assays used to screen or diagnosis cancer, cardiac, drugs of abuse, fertility, infectious diseases, and therapeutic drug monitoring; hematology systems and reagents; diagnostic systems and cartridges; instruments to automate the extraction, purification and preparation of DNA and RNA from patient samples, and detects and measures infectious agents; genomic-based tests; informatics and automation solutions; and a suite of informatics tools and professional services.
The Jefferies team notes that the company has the potential to repatriate as much as $8.4 billion from overseas, in addition to the potential to accelerate sales growth 5% to 6%.
Abbott Labs investors are paid a 1.81% dividend. The Jefferies price target for the stock is $69, and the Wall Street consensus target is $61.47. The stock traded early Friday at $62.10 per share.
This solid health care stock has good upside potential, and many on Wall Street think the growth potential is not appreciated. Cerner Corp. (NASDAQ: CERN) offers hospitals and other health care providers a fully integrated scope of over 50 software applications, including its flagship Cerner Millennium solution. Software applications include traditional electronic medical record and computerized physician order entry solutions, along with other clinical information software for lab, radiology, pharmacy, emergency department and ambulatory care.
The company also develops software for financial and administrative applications such as patient accounting, registration and scheduling.
The Jefferies team sees the company coming away with big government contracts, with large orders specifically from VA hospitals around the nation. The company also could benefit from its partnership with Amazon, as the tech giant continues to expand its product offerings and capabilities.
Jefferies has a $75 price target, while the posted consensus target is $71.75. The stock traded at $63.95 a share Friday morning.