Kenneth Fisher is the founder, chairman and CEO of Fisher Investments, headquartered in Woodside, California. He is also a columnist in Forbes magazine. With wealth valued at $1.6 billion, Fisher was in the Forbes 400 list of richest Americans in 2010, and Forbes' list of world billionaires. In 2010, he was chosen as one of the 30 most influential people in the investment sector by Investment Advisor. Fisher also writes influential research papers about finance strategy.
Ken Fisher is a very successful investor. As he mentions in his column, in the 14 years that he has been writing in Forbes and analyzing stocks, he has been topped by the S&P 500 (SPY) only three times. His average gain in 14 years has been 9.9%; and in those years, the corresponding market average has been 4.7%.
In his portfolio, there are 538 securities worth $38 billion. He has an aggressive style of value investing. Here is a brief analysis of Kenneth Fisher’s seven new healthcare picks. (Data from Finviz and current as of the June 3 close.)
1. Sanofi-Aventis (SNY) is a Paris, France,-based pharmaceutical. The company ranks fourth in the world in terms of sales revenue. Sanofi-Aventis is one of the best dividend paying companies in the healthcare business. As of the June 3 close, yield was 4.75%. Its P/E ratio was 13.80. Analysts have extremely bullish expectations on the stock's future. The forward P/E is expected to fall to 6.91.
In last five years, shareholders enjoyed an EPS growth of 20.04%. Sanofi-Aventis’ beta value is pretty low, 0.85. Gross margin is 70.60%, and the operating margin is 16.43%. Net profit margin stands at 12.06%. Among 35 analysts, 19 have buy ratings, and four have outperform suggestions. The largest institutional holder Dodge & Cox increased its position by 2 million shares. I think Sanofi-Aventis is a fairly priced company with a low forward P/E ratio and high dividend yield.
2. Novo Nordisk A/S (NVO), a Danish pharmaceutical, is one of the world’s leading companies in diabetics care. Novo Nordisk was ranked 25th among the top 100 companies to work for by Fortune Magazine. The past five year EPS growth has been a whopping 22.51%, and the next five years' annualized EPS growth is estimated to be 15.65%. Novo’s beta value is 0.48, which is significantly low. Novo Nordisk’s gross margin is 80.72% and operating margin is 31.21%. Its dividend yield is 1.52%.
While Novo is a high growth company in a niche market, it has a pretty high P/E ratio. TTM (trailing 12 month) P/E as of the June 3 close is 25.24, and is expected to be 19.48 in the next year. Since September, the stock has been in a high momentum, and currently testing its support levels. I think it might be a good idea to wait for a correction before diving in.
3. Integra LifeSciences Holdings Corporation (IART), based in Plainsboro, New Jersey, is the global leader in medical devices. Integra LifeSciences is the first company to produce artificial skin. Forbes named Integra as one of America's 100 Best Small Companies in 2010. As of the June 3 close, Integra LifeSciences’ P/E ratio was 23.07, and its forward P/E ratio was 14.67. EPS growth of Integra LifeSciences was 13.69% in the last five years, and it is expected to be 10.86% in the next five years. This year's EPS growth estimate is 25.21%. Its beta value is 0.96. Integra LifeSciences’ gross margin is 63.55%, and operating margin is 13.09%.
Insiders own 2.80% of the company, institutions own 68.43%, and Fisher Asset Management owns 1.34%. Integra does not pay dividends. On January 24, RBC Capital Markets downgraded Integra LifeSciences to $48. The stock was in a volatile state for the last three months, and since last week there is a strong sell-off. The short-term trend is downward.
4. Wright Medical Group (WMGI) is a Clarion, Iowa,-based company, operating hospitals and medical centers. As of the June 3 close the market cap of Wright Medical Group was $593 million. Its P/E ratio was 27.14, and forward P/E ratio was 17.88. In the past five years EPS decreased by 4.72%, annually. However, in the next five years, the estimated EPS growth is estimated at 13.16%. The gross margin is 69.97%, and the operating margin is 8.69%. Insiders own 1.37% of the company, and institutions own 98.50%.
On March 23, Brigantine upgraded Wright Medical’s shares to $17. Given Friday's closing price of $15.20, the implied upside potential is 15% in the intermediate term. Fisher Investment owns 1.4% of the company, and he made his purchase between the $14.5-$17.5 range.
5. Emergent BioSolutions (EBS) is a multinational biopharmaceutical company headquartered in Rockville, Maryland. It is mainly dealing with vaccines for Hepatitis A and Hepatitis B, and recently licensed an anthrax vaccine. Its market cap as of the June 3 close was $838 million. Its P/E ratio was 27.44, and forward P/E ratio was 16.98.
Emergent BioSolutions shareholders enjoyed an EPS growth of 18.02% in the last five years. In the next five years, EPS growth is estimated to be 10%. Gross margin is 84.23%, and the operating margin is 13.52%. Emergent BioSolutions has a strangely negative beta value of -0.32. Insiders own 20.64% of the company, and institutions own 57%. Recently, WBB Securities upgraded BioSolutions with a target price of $30, implying almost 20% upside potential. While the company is doing very good, the stock is in an instable state. Also, $25 acts as a very strong resistance level with multiple cap formation. Fisher has around 2.8 million shares invested in the company.
6. Natus Medical (BABY) is a healthcare company based in San Carlos, California. It is the leading producer of monitoring and treatment devices for newborn care, sleep disorders, hearing impairment and epilepsy. As of the June 3 close, Natus Medical’s market cap was $461 million. Its P/E ratio was 30.58, which is pretty high. However, its forward P/E ratio falls to 17.67.
Its past five years EPS growth was 4.39%, and the future five years' EPS growth estimation is 15.67%. This year’s EPS growth is expected to be 2.06%. Its gross margin is 59.01%, and operating margin is 10.12%. Institutions own 87% of the company, and they increased their holdings by 3.44% in the last quarter. While the stock is pricey, given the high growth expectations, it could be added to a growth-oriented portfolio.
7. Haemonetics Corp. (HAE), based in Braintree, Massachusetts, is a global provider of blood and plasma supplies and services. As of the June 3 close, its market cap is $1.7 billion. Its P/E ratio was 21.19, and forward P/E ratio was 16.78. Haemonetics has a low beta value as 0.34. Insiders own only 0.43% of the company. Its gross margin is 52.49%, and its operating margin is 16.34%.
This year's EPS growth is 39.52%. Past five years' EPS growth was 4.65%, and the next five years’ EPS growth is estimated to be 13.23%. Fisher acquired the stock at the $58-$62 range. Share price as of the June 3 close was $66. Analysts have an average target price of $71.44, implying 10% upside potential in intermediate term.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.