We are only in May, but 2020 is already one of the most incredible years in stock market history. Despite the strong push off the bottom in March, money markets are stuffed with trillions in cash and investors remain very bearish. Those looking for stock ideas should stay with sectors that are leading the way.
One of Wall Street’s most respected lists of stock picks is the Goldman Sachs Conviction List. These are the firm’s top ideas for high net worth and institutional accounts, and they are spread across 10 sectors. We screened the list looking for companies in the health care sector, which has been humming along in what has been a turbulent year, to say the least.
We found five outstanding companies that make sense for long-term growth investors looking to add or increase exposure to health care, particularly pharmaceuticals and biotechnology. Remember that no single analyst report should be used as a sole basis for any buying or selling decision.
BioMarin Pharmaceuticals
This a Wall Street favorite and a solid biopharma play. BioMarin Pharmaceuticals Inc. (NASDAQ: BMRN) develops and commercializes innovative biopharmaceuticals for serious diseases and medical conditions. Its product portfolio comprises five approved products and multiple clinical and preclinical product candidates.
Over the past decade, BioMarin has become one of the top orphan drug companies, and it looks poised to stay there. Roche recently has been mentioned as a company that could be looking at BioMarin. Roche is focused on oncology drugs and invests heavily in early-stage molecules.
The consensus earnings forecast for 2020 has been scaled down by a penny per share. However, the full-year 2021 estimate has been lifted to $1.20 per share from the previously forecast $1.13.
The Goldman Sachs price objective is $165, while the Wall Street consensus target price is just $117.18. BioMarin Pharmaceuticals stock closed trading on Friday at $95.20 a share, up 3.5% on the day.
Eli Lilly
This company also has solid upside potential, and it is a great pick for conservative accounts. Eli Lilly and Co. (NYSE: LLY) is a global health care company with numerous core products in a number of primary-care pharmaceutical markets. The company generates revenues from its pharmaceutical product and animal health segments.
The product portfolio includes Zyprexa (for schizophrenia and bipolar disorder), Gemzar (pancreatic cancer), Evista (osteoporosis), Cymbalta (depression), Cialis (erectile dysfunction), Strattera (attention deficit hyperactivity disorder), Erbitux (cancer) and Alimta (chemotherapy). Eli Lilly also has a strong presence in the diabetes market.
The company posted stellar first-quarter results, with revenue of $5.9 billion, up 15% year over year. Several of the pharma giant’s drugs performed particularly well during the quarter. For instance, sales of the diabetes medication Trulicity hit $1.2 billion, or 40% higher than in the year-ago period. And Eli Lilly’s plaque psoriasis treatment Taltz recorded revenue of $443.5 million, a whopping 76% year-over-year increase.
Shareholders receive a 1.93% dividend. Goldman Sachs has a $186 price objective, and the consensus target is $156. Eli Lilly stock closed at $153.51 on Friday.
Incyte
This top mid-cap is rumored to be in the sights of a larger biotech company. Incyte Corp. (NASDAQ: INCY) has a current validated approach in hematology-oncology, and there’s reason to believe the three wholly owned clinical-stage assets the company has could drive several billion in revenue, something important for an acquiring company looking to acquire assets.
Incyte focuses on the discovery, development and commercialization of proprietary therapeutics in oncology. It offers Jakafi for the treatment of myelofibrosis and polycythemia vera cancers. The company’s commercial products also include baricitinib for rheumatoid arthritis, which was approved last June by the FDA.
Many on Wall Street are bullish on Incyte’s rich pipeline of small molecule therapies in all stages of development, and they see the company as a key player in the cancer space. First-quarter results were strong, with Jakafi and additional revenue streams providing a high valuation floor, and the late-stage dermatology program provides a significant near-term growth opportunity.
The $125 Goldman Sachs price target is well above the $95.33 consensus target. Incyte stock ended last week at $95.92.
Regeneron Pharmaceuticals
This is a top biotech play for aggressive accounts to consider. Regeneron Pharmaceuticals Inc. (NASDAQ: REGN) is a biopharmaceutical company focused on the development of therapeutic human antibodies for the treatment of eye disorders, hypercholesterolemia, cancer, inflammation and other diseases.
Regeneron’s product sales are driven principally by its VEGF inhibitor Eylea, which is approved for use in wet age-related macular degeneration and diabetic macular edema, and by Praluent for the treatment of hypercholesterolemia.
First-quarter results were better than expected on both the top and bottom lines. Many analysts are still digesting account changes. The 2020 guidance provided on expenses was generally in line with Wall Street expectations.
Goldman Sachs has set a massive $700 price target. The consensus target is $531.50. Regeneron stock closed most recently at $563.40.
24/7 Wall St.Vertex Pharmaceuticals
This is another potential takeover target. Vertex Pharmaceuticals Inc. (NASDAQ: VRTX) engages in discovering, developing, manufacturing and commercializing small molecule drugs for patients with serious diseases in specialty markets. The company focuses on developing and commercializing therapies for the treatment of cystic fibrosis (CF) and hepatitis C.
The company markets Trikafta, Symdeko/Symkevi, Orkambi and Kalydeco to treat patients with CF who have specific mutations in their CF transmembrane conductance regulator gene. It is also developing VX-814, which is in Phase 2 clinical trial, and VX-864, which is in Phase 1 clinical trial for the treatment of alpha-1 antitrypsin deficiency; VX-147 for treating kidney diseases; and CTX001, which is in Phase 1/2 clinical trial for the treatment of beta-thalassemia and sickle cell diseases.
First-quarter earnings per share came in better than expected, and the bottom line skyrocketed 124.5% year over year to $1.52 billion. CF product sales soared 77% year over year, driven by the rapid uptake of Trikafta, a triple combination regimen, in the United States and the recent reimbursement approvals for Orkambi and Symkevi in the international markets.
The $290 price target that Goldman Sachs has on Vertex Pharmaceuticals stock compares with the $283.91 consensus target and the most recent close at $271.63.
These are five of the best health care stocks, and all are on the Goldman Sachs Conviction List. Given the surge in the market, and the prices of some of these stocks, it makes sense to scale buy into a position, as it is very possible we could see some consolidation after a big run-up from the March lows.
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