This has been an epically bad year for the healthcare sector, but there are still a few stocks out there that Wall Street analysts like. Some of them are even more beaten down than the rest of the industry.
The
S&P 500 Health Care sector index
is down 3% this year, vastly behind the S&P 500, which is up 15.7%. The index fell 3.6% last year, so if it doesn’t recover before the end of 2023, it will be the first time it has dropped in two consecutive years for more than two decades.
No corner of the industry has been spared. The
SPDR S&P Biotech ETF
(ticker: XBI) is down 8.3%, while the
S&P 500 Pharmaceuticals
industry index is roughly flat. The
iShares U.S. Medical Devices ETF
(
IHI
) is down 4%.
Still, opportunities for stock picking remain. A few individual health stocks have far outperformed the market this year, including
Eli Lilly
(LLY),
Vertex Pharmaceuticals
(VRTX), and
Zoetis
(ZTS).
In order to identify healthcare stocks that analysts see as possible winners, we screened the
S&P 500
for stocks with Buy ratings from more than 70% of the analysts who cover them and whose ratings are included in
FactSet’s
data.
The stocks that passed the screen included some that are beating the market this year, but more that are lagging even farther than the rest of the healthcare sector. The larger members of the group include the animal medicine company
Zoetis
(ZTS), the insurer
UnitedHealth Group
(UNH), and
Boston Scientific
(BSX), which makes medical devices.
Other stocks that passed the screen are smaller, and less well-known. They are
DexCom
(DXCM), which sells a glucose monitoring system for diabetes patients;
Bio-Techne
(TECH), which sells tools to the life sciences industry; and
Bio-Rad Laboratories
(BIO), which also services the life science research and diagnostics industries.
| Company / Ticker | Market value (bil) | YTD Price change | Buy-Rating Ratio |
|---|---|---|---|
| Zoetis / ZTS | $82.7 | 22.6% | 86.7% |
| Bio-Rad Laboratories / BIO | 10.7 | -12.5 | 83.3 |
| Bio-Techne / TECH | 11.3 | -14.1 | 76.9 |
| DexCom / DXCM | 37.0 | -15.8 | 73.9 |
| UnitedHealth Group / UNH | 450.2 | -8.3 | 73.1 |
| Boston Scientific / BSX | 77.6 | 14.5 | 71.9 |
Source: FactSet.
Zoetis,
for one, was a shoe-in for the list. The stock is up more than 20% so far this year, its revenues are growing, and analysts are enthusiastic about the launch of Librela, a new pain medicine for dogs. In a note in early August, William Blair analyst Brandon Vazquez, who has an Outperform rating on the stock, said that the Librela launch will help the company “sustain its recent momentum and deliver double-digit EPS growth.”
Zoetis stock trades at just over 30 times the per-share earnings expected over the next 12 months, according to FactSet.
Bio-Rad, though less well-known and only a fraction of Zoetis’s size by market value, is just as much of an analyst darling. The stock is down 12.5% this year, but it has a Buy rating from four of the five analysts tracked by FactSet who cover the company and are tracked by FactSet.
Bio-Techne
has a Buy rating from eleven of the 13 analysts tracked by FactSet who cover it.
Write to Josh Nathan-Kazis at [email protected]
Read the full article here