Update-4 10/7...We will update our biopharma playbook next week with a focus on large caps. Our current picks are: Abbvie (ABBV), Lilly (LLY), Regeneron (REGN), and Vertex (VRTX); Pfizer (PFE) is a contrarian trade for value and good news.
Update-3 10/6…A great day finally even biotech perking up off bottom.. For the week our new picks did well: ABBV up 3 pts from Tuesday low to $148.24, up 2 pts from Tuesday lows to. $68.46, UNH up 4.09% for the week to $524.81.
- IBB off recent low of $118.52 to $122.48. Are we at the bottom?
- XBI off recent bottom of $69.09 t0 $72.23..
Update-2 10/3…Trimmed my position in LLY as obesity bubble loses weight. UNH holds latest gains at $511. NVAX soars 8% to 7+ handle on FDA approval of COVID-19 vaccine. DHR, HOLX and TMO in the green today. Ten year at 4.802% yield!
NEWS on M&A: Lilly buys Point Biopharma for targeted oncology in $1.4B deal.
Update-1…10/2 3:12 p EDT… We are mired in the macro muddle as the FED and the 10 yr yield soaring at 4.7% controls the market sentiment. The XLV remains weak but the UNH looks good.Our recent trade of Pfizer (PFE) looks good today up 1.94% to $33.81. So stick with the larger caps until we get some M&A or clinical news to bolster SMD life science. The IBB looks dreadful down 1.8% to $120 handle. ARKG and IWM also weak.
Three Stock Picks for your healthcare Portfolio: ABBV, GEHC and UNH.
- Amidst macro uncertainty healthcare stocks should outperform.
- Biopharmaceuticals have good value and survived government onslaught on Medicare pricing and FTC.
- Growth stocks are being hit hard by rising rates with 2 yr TSY Yield of 5.1%
We recently published a playbook of investment strategies for healthcare and biopharma stocks. Today I’ll focus on 3 stocks as core holdings in a healthcare portfolio all previously covered in our posts with GE HealthCare Technologies , Inc. (GEHC) a new portfolio pick around $64.
It’s been a good year for the stock market especially if you are overweight large cap tech tech stocks with the QQQ up about 26% YTD. Even the S&P 500 is up about 12% YTD, all these gains despite a choppy sell-off in September. But major headwinds are developing for the economy and the market with an auto strike, a potential government shutdown and the 2 year treasury yield above 5%. So healthcare stocks should be attractive with perceived lower risk because of their defensive nature. Although the XLV is down 4% YTD many of our biopharma stock picks have done well YTD: LLY UP 50%, REGN UP 15%,VRTX up 21%. We have focused on three sectors of healthcare for our coverage Biopharmaceuticals, MedTech and Diagnostics and Tools. And we have discovered it’s tough to trade SMID more speculative stocks. But the momentum should return to smaller cap biotechs later in Q4.
MedTech has not recovered as expected with the IHI down over 7% YTD and 3.89% over 5 days, Even a leader Stryker (SYK) is down 4.94% over 5 days, Until we get Q3 earnings and guidance we.must remain cautious as MACRO and government dysfunction rules.
So our first pick that we bought and mentioned last week is GE Healthcare Technologies (GEHC), a digital solutions innovator. GEHC is a long term play on AI for PET,advanced medical imaging (MRI), ultrasound,and theranostics agents for cancer and new Alzheimer drugs. The Company recently received FDA approval for Portrait Mobile a smart phone sized wireless monitoring solution for early detection of patient deterioration.Buyers came in yesterday and the stock was up over 3% to $66.48. The Company was spun out of parent GE in late 2022 and well received at about $60. Then the stock ran up to the $87 handle until Q1 earnings miss and subsequent sell-off despite 8% YoY revenue growth. EPS was 0.41 vs prior 0.86 due to redemption of common stock. Q2 was much better with EPS of $0.91 vs $1.04 prior year. Fwd PE is 15.42 with an overall recommendation of 2 (buy). We expect better earnings and applications news with the Q3 report.
Our second pick Abbvie (ABBV) is well known to our readers over the past five years. The stock was volatile due to blockbuster Humira generic competition but the stock recovered from recent lows of $131 to $154.20 today has a FWD PE of 13.82 and a P/S of 4.84. Recombination has moved up to a 2.03 (buy) level. New products, Skyrizi and Rinvoq are expected to make up some of the shortfall from Humira sales losses as well as 50+ late stage clinical programs; in Immunology, Oncology, Neuroscience, Botox and others.
Our third pick is United Health because of it size, value and wide range of products and services. It is well positioned for growth in the future with a robust balance sheet and financial strength.The FWD PE is 18 with P/S of 1.34 and an analyst rating of 1.48. If you need a healthcare portfolio you have to own one provider and UNH is one of the best. Note that the iShares U.S. Healthcare Providers ETF (IHF) is down 7.09% at $248.71.
As of 2P EDT major biopharmaceutical stocks are mixed with AMGN GILD LLY REGN VRTX in the green. The IBB is up 0.6% and the S&P is down 1.3%.