Very few sectors of the market have had a rougher six months than the medical device makers. Many are down 30% or more since spring. Many stocks are now selling at the very bottom of their five year valuation ranges, are significantly under analysts’ price targets and appear to have solid technical support. Here are two that I like at these price levels.
St. Jude Medical (NYSE:STJ) - "St. Jude Medical, Inc. develops, manufactures, and distributes cardiovascular and implantable neurostimulation medical devices worldwide. It operates in four segments: Cardiac Rhythm Management, Cardiovascular, Atrial Fibrillation, and Neuromodulation." (Business description from Yahoo Finance).
4 reasons to pick up St Jude at $37 a share:
1. The stock has strong technical support at $35 (See Chart).
2. St. Jude is selling at the very bottom of its five year valuation range based on P/B, P/E, P/S and P/CF.
3. St. Jude is selling under analysts’ price targets. The median analysts’ price target on STJ is $47 and Credit Suisse has a price target of $48 on STJ.
4. The stock provides a 2.3% dividend yield and has a forward PE of under 10.5 which is an over 35% discount to its five year average.
Stryker Corporation (NYSE:SYK) – “Stryker Corporation, together with its subsidiaries, operates as a medical technology company worldwide. The company operates in three segments: Reconstructive, MedSurg, and Neurotechnology and Spine”. (Business description from Yahoo Finance)
4 reasons SYK is a solid buy at $48 a share:
1. It appears to have put in a technical bottom in the $45 to $50 range (See Chart)
2. It is under key analysts’ price targets. The median analysts’ price target on Stryker is $62 and S&P is at $60 on SYK.
3. Stryker is selling at the very bottom of its five year valuation range based on P/E, PB, P/S, and P/CF. Stryker also has a forward PE of 11.7 which is a 35% discount to its five year average
4. The company has an A+ rated balance sheet, a low beta (.87) and was near $65 as recently as May. It also just announced large buyback and dividend increase.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in STJ, SYK over the next 72 hours.