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4 Healthcare Stocks to Buy on the Dip

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Healthcare stocks dragged down the indices yesterday, with the S&P 500, Dow and Nasdaq declining 2.6%, 1.9% and 3%, respectively. The broad decline demonstrated growing fears among investors surrounding the increasing political interference that will soon put a stop to drug price increases, thereby hurting revenues for healthcare companies.

Primarily, biotech and pharmaceutical stocks crashed on Monday, dealing a heavy blow to the S&P 500 Healthcare (sector) that dropped 3.8%. Yesterday's sell-off followed a rather wild week for the healthcare sector. The S&P 500 Healthcare (sector) dropped 5.8% for the week - marking the worst weekly performance in over four years.

Last week's widespread sell-off followed Hillary Clinton's " Price Gouging " tweet that rattled biotech stocks like Celgene, Biogen and Regeneron. Clinton also unveiled a plan aimed at lowering prescription drugs and restricting drug makers from spending government grants on advertising.

However, Clinton's plan was not welcomed by industry participants including biotech companies and large insurers. These companies have argued that lower prices and spending restrictions will impede medical research for new drugs against deadly diseases.

The situation took a turn for the worse on Monday when the House Committee on Oversight and Government Reform signed a letter demanding a subpoena that will compel Valeant Pharmaceuticals VRX to provide information on its latest drug price hike. Valeant's shares fell 16.5% to close at $166.50 on Sep 28.

Following the development, pharmaceuticals like Mylan, Allergen, Endo International and Mallinckrodt (all S&P 500 members) also posted steep declines. Shares of biotech company Regeneron Pharmaceuticals and hospital/nursing management provider Tenet Healthcare were also in the red.

Healthcare on Rocky Grounds

The recent dip in the healthcare space has alarmed investors. We believe increasing volatility in the sector owing to the upcoming elections will weigh on investors for the time being. Healthcare is an important issue for voters and apparently all the candidates are very eager to address their grievances through the adoption of new strategies.

Immediately following Hillary Clinton's proposal, her opponent for the Democratic presidential nomination, Sen. Bernie Sanders, presented his own prescription drug proposal, which urges more transparency on pricing. Sanders also plans to allow Americans to import drugs from Canadian pharmacies. We would not be surprised if a few other plans crop up over the next couple of months.

4 Attractive Bets

We believe yesterday's dip has created an amazing opportunity for investors in the healthcare space. Selecting the right scrip with a solid growth potential can be a momentous task, but it can be simplified by our style score system .

Our Growth Style Score condenses all the essential metrics from the company's financial statements to get a true sense of the quality and sustainability of its growth. Our research shows that stocks with Growth Style Scores of 'A' or 'B' and a Zacks Rank #1 (Strong Buy) or #2 (Buy) offer the best investment opportunities in the growth investing space.

All the four stocks presented herein flaunt a Zacks Rank #2 and a Growth Style Score of 'A'.

Kindred HealthcareKND - Shares of this hospital, nursing center, rehabilitation, and care management operator plunged 8.9% on Sep 28. However, the company has an impressive earnings history, as it has surpassed the Zacks Consensus Estimates by 21% on an average.

Recent estimate revisions are also encouraging. Over the last 60 days, 2015 and 2016 estimates have risen 3.8% and 3.6%, respectively. Moreover, long-term EPS growth is currently projected at 14%, which is almost at par with the industry average.

BioTelemetry Inc . BEAT - This cardiac monitoring services, cardiac monitoring device manufacturing, and centralized cardiac core laboratory services provider lost 8.2% on Sep 28. Notably, the company crushed the Zacks Consensus Estimates in the last four consecutive quarters, with an average beat of a massive 162.5%.

Recent estimate revisions are also on the positive side. Over the last 60 days, 2015 and 2016 estimates have increased 8.3% and 4.3%, respectively.

LeMaitre Vascular Inc.LMAT - This medical device maker experienced an 8.6% decline in its share price on Sep 28. However, the company's extensive product portfolio that includes Xenosure, Omniflow and HYDRO for the treatment of peripheral vascular diseases makes it an attractive bet.

To add to the strengths, the company has been topping the Zacks Consensus Estimate lately with the last four quarters averaging a hearty 35.8%. The stock has also witnessed positive estimate revisions (3.1% for 2015 and 8.1% for 2016) over the last 60 days.

Envision Healthcare Holdings Inc.EVHC - Shares of this outsourced medical services provider fell almost 7.1% on Sep 28. Notably, the company has delivered an average earnings beat of 3.9% over the last four quarters. Moreover, long-term EPS growth is currently pegged at 19.1%, better than the industry average of 17.1%.

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BIOTELEMETRY (BEAT): Free Stock Analysis Report

KINDRED HLTHCR (KND): Free Stock Analysis Report

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VALEANT PHARMA (VRX): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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