The healthcare industry has long been an option both for patients to get healthy and for investors to increase the worth of their portfolios. Today, I'll avoid the pharmaceutical giants and concentrate on improving your portfolio with companies like AmerisourceBergen Corp (ABC), Cardinal Health Inc (CAH), McKesson Corp (MCK), Owens & Minor Inc (OMI) and CVS Caremark Corp (CVS). I chose to explore these five healthcare companies because they all have a positive outlook for growth heading into the coming quarters.
AmerisourceBergen is known for providing drug distribution and similar services to medical care providers and manufacturers that are located primarily in the United States. The company distributes pharmaceutical drugs and over-the-counter medications. Currently trading around $38 per share, the stock is in the middle of its 52-week range of $34.33 to $43.47, and has a one-year target at over $45 per share. AmerisourceBergen increased its sales (up 2.4%), but saw earnings per share dip (down $0.01 for the quarter). The company pays a $0.52 dividend for a 1.3% yield.
Although many on Wall Street will point to the earnings and rush to sell, AmerisourceBergen should probably be looked at as a hold. Although the company's price-to-book ratio (currently at 3.46) is somewhat high, its projected share price increases and continued dividend are good enough reason to hold onto any current positions. Should its price gain some momentum and cross its 200-day moving average, investors may want increase or initiate positions to take advantage.
Cardinal Health Inc
Like AmerisourceBergen, Cardinal Health provides drugs and healthcare products for primary care and retail distribution. It also supplies products for use in nuclear imaging and other procedures in hospitals and clinics. Trading near $42.50 per share, Cardinal has a 52-week range of $37.53 - $47.06 and a one-year target estimate of almost $50. The company also pays an annual dividend of $0.86 for a yield of 2.1%, and it is currently finalizing a takeover bid for Toronto-based Futuremed (TSX: FMD.TO).
Cardinal looks to be a very solid buy at the current time. It has a better price-to-book ratio than AmerisourceBergen (2.47) and low volatility (with a beta of 0.71) to go along with its quarterly revenue growth of 6.7% and a whopping 21.6% increase in earnings. The company is expanding and sitting on a $1 billion mountain of levered free cash flow. With so many solid factors, I would recommend that investors consider implementing a position at this time.
Much like its competitors, McKesson Corp provides pharmaceutical supplies, medicines, information, and care management products to the healthcare industry. The company distributes drugs, surgical supplies and health and beauty care products throughout the United States and Canada. With a current price of almost $83 per share, McKesson stock is trading in the upper limits of its 52-week range ($66.61 - $87.32), and its one-year target of $96 represents a potential increase of over 14%. The company also offers a dividend of $0.80 for a yield of 1%.
Based on its numbers, I think McKesson is a great buy at the current time. Starting with its price-to-earnings ratio of 16, the company can rattle off solid metrics like a quarterly earnings growth of over 93%, free cash flow of $1.92 billion and a reasonable price-to-book ratio of 2.73. This company enjoys low levels of volatility (its beta is 0.66) and revenue growth rate of 9.2% looks very positive going forward. With a big potential stock price increase and a growing dividend yield, McKesson is an excellent option.
Owens & Minor Inc
Owens & Minor operates as a medical and surgical products supplier, in addition to offering third-party support of client supply chains and logistics. The $1.9 billion company is currently trading at a stock price of around $30 per share, near the midpoint of a 52-week range of $25.87 - $35.71. Although the company's one-year target estimate of $29.50 represents very little expected movement, it does pay a handsome $0.80 dividend for a 2.6% yield.
Although its target estimate is weak, I like this company, and I think it is going to surprise. Look for the stock price to jump since the company recently announced that it beat the earnings estimates for past quarter, with sales increasing by 6.1%. Owens & Minor is trying to push past resistance at its 200-day moving average; should this happen, its price to earnings ratio of 16.8 and its reasonable price-to-book ratio of 2.1 suggest that the stock could make a nice run. Coming off a year where it had nearly 6% gains in both revenue and earnings, investors will seriously want to consider this excellent stock for both its price increases and its dividend.
CVS Caremark Corp
Most people are familiar with CVS, since their stores are on corners throughout the United States. This retail pharmaceutical provider had a strong 2011, ending the year with an earnings per share of $0.84 on a quarterly revenue gain of 12.5%. The stock is currently trading at $43.50 per share, near the top of its 52-week range of $31.30 - $44.09. The company has an annual dividend of $0.65 for a 1.5% yield, and a one-year target of $46.70.
The stock price for CVS has been rising since August, and it doesn't seem to be slowing down. On a steady upward trend, the stock is trading nearly $6 per share (nearly 16%) above its 200-day moving average, and its price-to-book ratio of 1.50 indicates that it is fairly priced. With Walgreen and Express Scripts Inc locked in a bitter dispute, CVS could be a big winner, adding to the growing expectations for 2012.
Improving the Health of Your Portfolio
Many sectors of the healthcare industry are profitable, and smart investors can capitalize on that success to find growth and dividend stocks. AmerisourceBergen Corp, Cardinal Health Inc, McKesson Corp, Owens & Minor Inc and CVS Caremark Corp all look to be strong candidates to include in any portfolio. Investors who need both the gains of a growth stock and the nice yield of a dividend stock should look at these five companies.