The market is heading towards its last few trading sessions of 2011. I am a big believer in picking up high quality stocks that had a tough go in the current year, as they tend to bounce back the next year as sentiment improves on their prospects. Two healthcare stocks I like at the price levels are below:
Warner Chilcott (NASDAQ:WCRX) – “Warner Chilcott plc, a specialty pharmaceutical company, focuses on the development, manufacture, and promotion of branded pharmaceutical products in women’s healthcare, gastroenterology, dermatology, and urology segments in North America and western Europe markets.” (Business description from Yahoo Finance)
Performance YTD: -31.37% Current Price: $14.98 Consensus Price Target: $24
Key value observations on WCRX:
· The stock is selling at the bottom of its historical valuation based on P/B, P/E, P/S and PCF.
· The stock looks like it is building a technical base at these levels (See Chart - click to enlarge).
· WCRX has a forward PE of under 4, one of the cheapest values in healthcare.
· Given its product line, low price to sales ratio and small market capitalization; WCRX would make a desirable acquisition for larger player in the space.
Life Technologies (NASDAQ:LIFE) – “Life Technologies Corporation operates as a life sciences company with a focus on improving the human condition worldwide. Its systems, consumables, and services enable scientific researchers and commercial markets to accelerate scientific exploration, leading to discoveries and developments that better the quality of life.” (Business description from Yahoo Finance)
Performance YTD: -28.37% Current Price: $38.86 Consensus Price Target: $49
Key value observations on LIFE:
· The stock is building a technical base at just under these price levels (See Chart)
· LIFE is selling at the very bottom of its five year valuation range based on P/E, P/S, P/B and P/CF.
· The company is selling for 9.5 times forward earnings despite the company growing earnings north of 20% annually on average over the last five years.
· LIFE has a five year projected PEG of around 1 and is selling at 9 times its high quality cash flow.
Disclosure: I am long LIFE.