"Health is not a cost; it's an investment.” Dr Alex
First, Let’s Review Current Market Scene...
Well, what a rally we are witnessing. Recent favourable CPI numbers have stoked the FOMO fire and, as of now, we see nothing on the horizon to put the brakes on this short-term surge. But let's not get carried away.
Despite the seductive climb, we are not advising to FOMO chase the current rally. For those already invested, our advice is to stay the course. Our analysis points to the U.S. on the verge of a mild recession around Q4 this year or Q1 of 2024.
Experience teaches us that markets often hit their peak 1-2 months before a recession. Given this trend, the present rally may still have room to run. But it's important to note that this surge will likely be disproportionately represented by the top 7 stocks, before gradually becoming more broad-based. With these considerations in mind, we foresee the market reaching its crescendo in Q4.
That said, there's always value to be found in the market, regardless of its overall state. Especially in the context of a possible impending recession, the healthcare sector appears to offer many promising opportunities...
Investing in Health: Why You Need Healthcare Stocks in Your Portfolio
From a broad perspective, investment diversification is an essential strategy for any portfolio, and that includes owning healthcare stocks. Notably, the US healthcare sector currently finds itself in the value area, with many stocks oversold and offering attractive entry prices.
The US healthcare sector is a dynamic sector, encompassing companies in pharmaceuticals, medical devices, healthcare services, and biotechnology. Major players like Johnson & Johnson, Pfizer, and UnitedHealth Group are US household names. From an investment viewpoint, this sector is attractive for numerous reasons: its relative defensiveness, meaning it's less vulnerable to economic downturns, rapid growth spurred by aging demographics, technological advances, and rising demand for healthcare services, and a roster of high-quality, profitable companies.
Trends and News: A Pulse Check on the US Healthcare Sector
As we journey through this sector, we encounter several emerging trends:
Personalized Medicine: Genetic information is increasingly being used to craft individualized treatment plans.
Telemedicine: Patients are now able to receive medical care from remote locations.
New Drugs and Devices: Advances in research have led to more effective treatments with fewer side effects.
Digital Health: Technology is revolutionizing healthcare delivery.
In addition to these trends, recent news has also influenced the sector. The Affordable Care Act expanded access to healthcare for millions of Americans, COVID-19 strained the healthcare system and fast-tracked the adoption of new technologies, and rising healthcare costs became a pressing concern for patients and policymakers.
Potential investors, however, should be aware of risks such as the high cost of research and development, complex regulatory environments, and the threat of patent infringement.
A good barometer for the sector's performance is the iShares U.S. Healthcare ETF (IYH), an index composed of U.S. equities in the healthcare sector. The divergence between IYH and the S&P500 over the past year as indicated below is something to note:
YEAR | IYH TOTAL RETURN (%) |
2018 | 5.8 |
2019 | 20.8 |
2020 | 15.5 |
2021 | 23.4 |
2022 | -4.4 |
Prescription for Investment: Bristol-Myers Squibb Company and CVS Health Corporation
Using the InvestWizeAI model, I've analyzed the top 12 stocks in the US healthcare sector and the results are in:
Based on the results, top picks for investment at this time are Bristol-Myers Squibb Company (XNYS:BMY) and CVS Health Corporation (XNYS:CVS). Let's take a closer look at these two.
Bristol-Myers Squibb Company: A Pillar in Biopharmaceuticals
Bristol-Myers Squibb, a global biopharmaceutical company, has carved out a space in the healthcare sector with a keen focus on discovering, developing, and delivering innovative medicines for patients with serious diseases. Bristol-Myers Squibb’s portfolio boasts an array of significant products such as Opdivo, Eliquis, Plavix, Avastin, and Sustiva, all testaments to the company's commitment to the research-driven approach.
From the metrics perspective, Bristol-Myers Squibb scores highly on EBITDA, Return on Equity, Revenue, and Gross Profit, all strong indicators of robust operational and financial performance. Yet, slower growth reflected in the Quarterly Revenue Growth and the PEG Ratio may pose challenges for maintaining revenue growth and suggests a need for concerted efforts to improve earnings growth.
Turning our attention to InvestWize’s analysis, the fair value range for Bristol-Myers Squibb is currently situated between $65.33 and $75.33. This range is a reflection of a balanced and comprehensive evaluation of the company’s financial health, growth prospects, and market conditions. Therefore, the current price of $61.90 represents an optimal buying window for potential investors who see the long-term potential in this resilient biopharmaceutical titan.
CVS Health Corporation: A Comprehensive Healthcare Provider
CVS Health is a multifaceted healthcare provider and an undeniable force in the sector. The company offers a wide range of services through CVS Pharmacy, CVS MinuteClinic, CVS HealthHUB, and Aetna, its health insurance branch. This diverse range of offerings puts CVS Health at the center of many Americans' healthcare needs and bolsters its position in the healthcare landscape.
The metric analysis for CVS Health unveils a promising picture: robust revenue growth, future stock performance, and strong Revenue per Share TTM and Revenue TTM. Despite a decline in the Quarterly Earnings Growth YOY, which may impact revenue growth and future stock performance, the company's profitability and diverse revenue streams signify potential for growth.
As per InvestWize, the fair value range for CVS Health falls between $85.35 and $95.35. This valuation takes into account the company’s operational efficiency, financial standing, and growth prospects. The current price of $71.40 offers a strong buying opportunity for investors who recognize the company's ability to navigate the complex healthcare environment while delivering value to its customers and shareholders alike.
Overall, now is a great time to invest in the healthcare sector with these two stocks. Great fundamentals, positive quarterly trends, and oversold price ranges make them prime choices.
Thanks for reading, and as always, remember to invest wisely.
#USHealthcareSector, #InvestmentDiversification, #HealthcareStocks, #Telemedicine, #Medicine, #DigitalHealth, #USHealthcareETF, #BristolMyersSquibb, #CVSHealth
Johnson & Johnson - www.jnj.com
Pfizer - www.pfizer.com
UnitedHealth Group - www.unitedhealthgroup.com
Bristol-Myers Squibb - www.bms.com
CVS Health - www.cvshealth.com
iShares U.S. Healthcare ETF - www.ishares.com
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