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Arie Goren, Portfolio123 (475 clicks)
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The healthcare sector has been the third best performer this year, the total return, year to date (11/27/2012) was 16.0%, while the appreciation of the Russell 3000 index in the same period was only 11.4%. Nevertheless, it is still possible to find promising candidates among the stocks in this sector.

Stock Sectors' Total Returns, Year to Date, are shown in the chart below:


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Source: finviz.com

I have searched for very profitable companies with strong growth prospects in the healthcare sector, companies where the average analysts' recommendation is a buy or better. I also looked for companies which are in short-term uptrend, in mid-term uptrend and in long-term uptrend. Stocks in an uptrend are performing well and are in a buying mode.

I have elaborated a screening method which shows stock candidates following these lines. Nonetheless, the screening method should only serve as a basis for further research.

The screen's formula requires all stocks to comply with all following demands:

1. The stock is included in the Russell 3000 index. Russell Investment explanation:

The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market. The Russell 3000 Index is constructed to provide a comprehensive, unbiased, and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are reflected.

2. Earnings growth estimates for the next 5 years (per annum) is greater than 17%.

3. Price to free cash flow is less than 19, (many investors prefer using free cash flow instead of net income to measure a company's financial performance, because free cash flow is more difficult to manipulate. Free cash flow is the operating cash flow minus capital expenditure).

4. The PEG ratio is less than 1.40.

5. Average analyst recommendations are bullish (less than 2).

6. Stock price is above 20-day simple moving average (short-term uptrend).

7. Stock price is above 50-day simple moving average (mid-term uptrend).

8. Stock price is above 200-day simple moving average (long-term uptrend).

After running this screen on November 28, 2012, before the market open, I obtained as results the 5 following stocks:


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AMN Healthcare Services Inc. (AHS)

AMN Healthcare Services, Inc. provides healthcare staffing and clinical workforce management solutions in the United States.

AMN Healthcare Services has a forward P/E of 20.11 and the PEG ratio is very low at 0.99. The price to free cash flow for the trailing 12 months is very low at 11.03 and the average annual earnings growth estimates for the next 5 years is extremely high at 47.8%. The stock price is 4.96% above its 20-day simple moving average, 9.33% above its 50-day simple moving average and 50.89% above its 200-day simple moving average. Analysts recommend the stock, among the seven analysts covering the stock, five rate it as a strong buy or as a buy. On November 26, Zacks Equity Research added the AHS stock to the Zacks #1 Rank ("strong buy") List. All these factors make the stock quite attractive.


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Chart: finviz.com

Celgene Corporation (CELG)

Celgene Corporation, a biopharmaceutical company, discovers, develops, and commercializes various therapies to treat cancer and immune-inflammatory related diseases primarily in the United States and Europe.

Celgene Corporation has a low forward P/E of 14.10 and the PEG ratio is very low at 0.96. The average annual earnings growth for the past 5 years was extremely high at 73.14% and the average annual earnings growth estimates for the next 5 years is also very high at 22.63%. The stock price is 4.63% above its 20-day simple moving average, 2.50% above its 50-day simple moving average and 7.86% above its 200-day simple moving average. Analysts recommend the stock, among the twenty seven analysts covering the stock, twelve rate it as a strong buy, seven rate it as a buy and eight rate it as a hold. On October 25, Celgene reported its third quarter financial results (here). Celgene said sales rose 14% over the year-earlier quarter to $1.42 billion, a hair above analysts' consensus of $1.41 billion. Adjusted earnings rose 26% to $1.29 a share, beating consensus by 2 cents. The CELG stock looks quite attractive.


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Chart: finviz.com

Cantel Medical Corp. (CMN)

Cantel Medical Corp. provides infection prevention and control products and services for the healthcare market worldwide.

Cantel Medical has a forward P/E of 17.85 and the PEG ratio is at 1.31. The average annual earnings growth for the past 5 years was very high at 28.08% and the average annual earnings growth estimates for the next 5 years is also very high at 18%. The stock price is 4.05% above its 20-day simple moving average, 2.08% above its 50-day simple moving average and 9.36% above its 200-day simple moving average. Analysts recommend the stock, among the two analysts covering the stock, one rates it as a strong buy and one rates it as a buy. On November 01, Cantel Medical announced that its board of directors approved an increase in its semiannual cash dividend. On that occasion, the company said:

We are pleased to announce the dividend increase, which will raise our annual dividend payment from $0.0934 to $0.11 per share. The increase demonstrates Cantel's strong financial position and our confidence in Cantel's future performance. We are accelerating our January 2013 semi-annual dividend into 2012 to give shareholders the benefit of the current tax rate on dividends.

All these factors make the CMN stock quite attractive.


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Chart: finviz.com

Gilead Sciences Inc. (GILD)

Gilead Sciences, Inc., a biopharmaceutical company, discovers, develops, and commercializes human therapeutics for the treatment of life threatening diseases worldwide.

Gilead Sciences has a forward P/E of 17 and the PEG ratio is at 1.36. The average annual earnings growth for the past 5 years was quite high at 20.14% and the average annual earnings growth estimates for the next 5 years is also quite high at 17.15%. The stock price is 5.89% above its 20-day simple moving average, 8.88% above its 50-day simple moving average and 34.36% above its 200-day simple moving average. Analysts recommend the stock, among the twenty nine analysts covering the stock, eleven rate it as a strong buy, fourteen rate it as a buy and four rate it as a hold. On October 23, Gilead Sciences reported its third quarter financial results (here). Gilead's Q3 results that topped analyst estimates on both the top and bottom lines, as sales of its HIV drugs Truvada and Complera handily beat expectations. The company also lifted its sales forecast for the full year. Sales rose 14% over the year-ago quarter to $2.43 billion, about $90 million more than analysts' consensus. Profit slipped 2% to $1 a share, but that was 6 cents above estimates. The GILD stock looks quite attractive.


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Chart: finviz.com

Vascular Solutions Inc. (VASC)

Vascular Solutions, Inc. develops solutions for interventional cardiologists and interventional radiologists worldwide.

Vascular Solutions has a no debt at all and its PEG ratio is quite low at 1.23. The price to free cash flow for the trailing 12 months is quite low at 15.14 and the current ratio is very high at 5.05. The average annual earnings growth for the past 5 years was very high at 25.57% and the average annual earnings growth estimates for the next 5 years is also very high at 21.50%. The stock price is 1.95% above its 20-day simple moving average, 1.40% above its 50-day simple moving average and 16.31% above its 200-day simple moving average. Analysts recommend the stock, among the five analysts covering the stock, three rate it as a strong buy and two rate it as a buy. On October 18, Vascular Solutions reported its third quarter financial results (here). For the quarter, Vascular Solutions met expectations on revenues and beat expectations on earnings per share. All these factors make the stock quite attractive.


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Chart: finviz.com

Source: 5 Healthcare Growth Stocks In Uptrend Analysts Recommend