While the overall stock market has been very strong year to date, with sectors like technology outperforming, the health care sector, which encompasses everything from pharmaceuticals to biotech to medical devices and more, has been absolutely wretched, lagging the S&P 500 by a huge 9%. For many investors who own shares, there may be a degree of dismay, as traditionally health care has been considered somewhat of a safe haven.
The analysts at Jefferies, led by equity strategist Steven DeSanctis, did a deep dive into the sector, looking for underperforming stocks that could hold some solid value going forward. Their overview of the current state of the health care sector noted this:
The pullback in Health Care has little do with fundamentals but more to do with a renewed sense of risk appetite, some unwinding of crowded themes, as well as a shift away from defensively positioned sectors showing secular growth into cyclical growth. ETF flows have sharply turned down after strong inflows in 2018 and the group is over owned by long only investors and hedge funds. Down cap, the last 12 months have seen robust IPO and secondary activity and deals may need to be digested.
We screened the Jefferies list looking for the larger cap leaders and found five that look like very solid ideas now. All 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.
Abbott Labs investors are paid a 1.72% dividend. The Jefferies price target for the shares is $80, and the Wall Street consensus target is $82.78. The stock closed Monday’s trading at $74.51 per share.
This biotech giant remains a top stock for investors to buy and a safe way to play the massive potential growth in biosimilars. Amgen Inc. (NASDAQ: AMGN) has been a biotechnology pioneer since 1980 and has grown to be one of the world’s leading independent biotech companies. It has reached millions of patients around the world and is developing a pipeline of medicines with breakaway potential.
Amgen develops, manufactures and markets biologic therapies for oncology and inflammation. The company’s five key marketed products are among the top-selling pharmaceutical products in the world, with expected collective revenues of more than $22 billion in 2019.
Shareholders of Amgen are paid a 3.29% dividend. Jefferies has a price target of $220, and the posted consensus target was last seen at $207.38. The shares were last seen trading at $176.36 apiece.
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