With the recent market sell-off behind us investors are looking for hope, optimism, and opportunity. Last week Healthcare investors began to worry about possible spending cuts that may affect the sector. A recent Reuters article, however, brought reassurance to investors stating, "Sharp falls in U.S. Healthcare stocks this week -- where industry bellwethers dropped as much as 8 percent in one day -- were a premature sell-off, analysts say, as the sector's underlying fundamentals remain strong."
In the article, Bob Phillips, co-founder of Spectrum Management Group in Indianapolis, mentioned:
"The reaction by and large is probably overdone. A number of these stocks are still paying great dividends and valuations are incredibly great. ... Demographically, no matter how you shake it, the population is aging, people will require more healthcare as they age. We're comfortable with the overall sector and think it will do well over the next 10 years, whether the government is the direct payer or not."
Here is a look at five Healthcare stocks that appear to be keeping analysts and investors confident in the sector:
Aetna Inc. (AET) recently fell to a previous support level around $34.00 and has since climbed back up to its current price of $36.89. The company holds a current analyst recommendation of 7 strong buys, 6 buys, and 11 holds with a mean profit target of $50.64, 37.27% above the stock's current price.
A recent Yahoo! Finance article shed some positive light on the stock stating:
"Aetna Inc., with a Zacks #2 Rank, is another pick. The health insurer has been making acquisitions and diversifying as well as strengthening its presence in health information technology, accountable-care organizations or ACOs, and Medicare plans. It has stepped up efforts to provide midsize companies with a self-funded insurance option. Aetna has been benefiting from higher rates and less membership declines. It also has been more assertive on hospital pricing and reimbursements. In May, the federal regulators lifted sanctions that had blocked Aetna from marketing Medicare plans and signing up new beneficiaries. The ban has been lifted just before the onset of the new enrollment season beginning July 1, 2011."
Aetna Inc. currently holds a $13.76 billion market cap with an annual income of $1.84 billion. The company's P/E (8.00), Forward P/E (7.69), P/S (0.41), and P/B (1.32) are all low and, therefore, strong. Currently 0.10% below its 200-day Simple Moving Average (SMA), due to a -13.93% price performance over the past month, the stock is cheap and may be worth picking up.
BioSante Pharmaceuticals, Inc. (BPAX) recently touched down to its 200-day SMA, has since climbed up 6.34%, and is now trading at $2.31. The company holds a current analyst recommendation of 4 strong buys and 2 buys with a mean profit target of $6.17, 167.10% above the stock's current price.
As stated in a recent Yahoo! Finance article:
"BioSante is currently running three late-stage clinical trials of LibiGel, a female sexual dysfunction treatment. The company plans to file a new marketing application in early 2012. In June, BioSante said it had stopped enrolling patients in a safety trial because a data analysis indicated a 90-percent chance the drug would meet its goal."
Though the company has been unable to escape net losses over recent quarters, analysts and investors alike appear to remain confident in its future. Regardless of the recent price dip, BioSante still holds a 50.00% yearly price performance and, as mentioned above, is just above its 200-day SMA. BioSante's current price should prove a tempting entry point for confident investors.
CIGNA Corporation (CI) has recently fallen from its 52-week high of $52.95 down to its current price of $43.47, landing the stock just 0.13% above its 200-day SMA. The company holds a current analyst recommendation of 7 strong buys, 4 buys, 10 holds, and 1 underperform with a mean profit target of $55.60, 27.90% above the stock's current price. Yahoo! Finance recently revealed its optimism of the company stating:
"CIGNA, carrying a Zacks #2 Rank, is relatively safe, owing to minimum exposure to MLR regulations, unreasonable rate reviews and health insurance exchanges. The company has also seen its bottom line boosted by price increases and exits from non-strategic markets such as the Medicare Advantage individual private-fee-for-service business. The company has also shown operating momentum and has gained commercial risk memberships for four quarters in a row."
CIGNA currently holds an $11.75 billion market cap with an annual income of $1.61 billion. The company's P/E (7.39), Forward P/E (7.89), P/S (0.54), and P/B (1.68) are all low and very strong. Though the stock has lost 13.32% of its value over the past month it still remains above its 200-day SMA and could easily bounce off of this resistance and continue upward.
Humana Inc. (HUM) recently fell from its 52-week high of $84.32 and appears to have bounced off of its 200-day SMA. The stock is now trading at $71.75, 7.06% above the aforementioned 200-day SMA. The company holds a current analyst recommendation of 9 strong buys, 5 buys, and 12 holds with a mean profit target of $88.74, 23.68% above the stock's current price. In an article detailing a recent analyst upgrade of Humana from "Neutral" to "Buy", analyst Matthew Borsch optimistically addressed concerns of possible federal spending cuts to Healthcare, stating:
"We think fiscal pressures will drive a bigger role for Medicare Advantage and ultimately a phasing-out of unmanaged `traditional' Medicare. Even without policy changes, (Medicare Advantage) is becoming the product choice for seniors as employer retiree coverage becomes increasingly rare."
As stated in the article,
"Medicare Advantage plans are privately run versions of the government's Medicare program. Subsidized by the government, the plans offer basic Medicare coverage topped with extras or premiums lower than standard Medicare rates. Humana is the second-largest provider of Medicare Advantage plans, trailing UnitedHealth Group Inc."
In other news, Humana recently received two top Stevie Awards® for its MyHumana app. The awards include Stevie Awards® – People’s Choice Award – Best New Smartphone or Tablet App and a subcategory award for Best New Product/Service.
The company has strong fundamentals with a P/E of 9.53, a Forward P/E of 9.28, a P/S of 0.34, and a P/B of 1.58, has continually increased net profit year over year, and is now somewhat cheap, trading just above its 200-day SMA.
Unitedhealth Group, Inc. (UNH) recently fell from its 52-week high of $53.50 and, like Humana, appears to have bounced off of its 200-day SMA. The stock is now trading at $44.73, just 2.64% above its 200-day SMA. The company holds a current analyst recommendation of 9 strong buys, 12 buys, and 6 holds with a mean profit target of $59.91, 33.94% above the stock's current price.
As mentioned above, Unitedhealth Group is the largest provider of Medicare Advantage plans. And, as stated in the above article,
"...fiscal pressures will drive a bigger role for Medicare Advantage and ultimately a phasing-out of unmanaged `traditional' Medicare. Even without policy changes, (Medicare Advantage) is becoming the product choice for seniors as employer retiree coverage becomes increasingly rare."
Unitedhealth Group has continually increased net profit, year over year, from $2.98 billion in 2008 to $3.82 billion in 2009 to $4.63 billion in 2010. The company's fundamentals are very strong with a P/E of 10.03, a Forward P/E of 9.36, a P/S of 0.49, and a P/B of 1.75. With the recent bounce off of its 200-day SMA and an analyst profit target 33.94% above its current price, it appears that both investors and analysts are still very confident in this, now inexpensive, stock.
Disclosure: Author is long UNH.