Rotating Into Health Care

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Includes: ABBV, AMGN, BIIB, BSX, CELG, GILD, GLD, IBB, REGN, TMO, VRX
by: Mad Hedge Fund Trader

Summary

There has been no more despised sector in the stock market for the past eight months than health care and biotech.

Ever since presidential aspirant Hillary Clinton launched the Tweet that sank the troubled sector in August, both political parties have taken turns beating it up, like tag team wrestlers.

Traders and investors can be forgiven for not wanting to touch health care with a ten-foot pole. The stocks responded by cratering a heart rending 30%-80%.

There has been no more despised sector in the stock market for the past eight months than health care and biotech.

Ever since presidential aspirant Hillary Clinton launched the Tweet that sank the troubled sector in August, both political parties have taken turns beating it up, like tag team wrestlers.

Clinton wants more competition in the industry and an end to price gouging, naming companies by name, like Valeant Pharmaceuticals (NYSE:VRX) as guilty parties. Trump is demanding more competition from foreign imports.

Ted Cruz intends to demolish that great wellspring of health care profits, Obamacare, on his first day in office. Bernie Sander wants to nationalize the lot.

Traders and investors can be forgiven for not wanting to touch health care with a ten-foot pole. The stocks responded by cratering a heart rending 30%-80%.

However, a funny thing has happened over the last few weeks. Health care and biotech stocks have started going up.

And you know what? They are going to keep going up. In fact, I think that health care, along with banks, and energy will be your big alpha plays for 2016.

The sector has one big thing going for it: the calendar.

Each passing day brings the end of the current election closer, and the end of the present onslaught on the sector. Think of all the negativity as an option approaching accelerated time decay.

And here's the crucial thing about health care. The earnings story never went away, only the share valuations did. Health care and biotech remain the healthiest segments of US industry with the greatest earnings prospects.

China, eat your heart out!

So fall down on your knees and thanks the politicians for a gift that will keep on giving. Their fulminating is enabling you to get into one of the best industries at the cheapest possible prices.

The shopping list is rich.

AbbVie (NYSE:ABBV) was spun off from Abbot Labs in 2013. It has a relatively low cost cancer drug, Imbruvica, which dodges political risk. It also sells a blockbuster rheumatoid arthritis drug, Humira, and a hot thyroid drug. Earnings per share will double in two years.

Boston Scientific (NYSE:BSX) has a solid market share in medical devices, one of the safest corners of the health care field. No controversial $100,000 cures here. So does Thermofisher (NYSE:TMO).

Gilead Sciences (NYSEARCA:GLD) is a name my Trade Alert followers already know and love, having made fortunes there in the last couple of years. They have the last word in a hepatitis cure, Solvaldi. For more depth on the company, please read my latest opus by clicking here for "Keep Gilead Sciences on Your Radar" (note: you have to be logged in to read it).

Celgene (NASDAQ:CELG) has several blockbuster drugs in the pipeline treating psoriasis (Otezla), blood cancer (Revlimid), and cancer (Abraxane). A classic baby boomer retirement play, the company should double in value in five years.

Finally, if you want to take a safer basket play, look at the IShares NASDAQ Biotechnology Index ETF (NASDAQ:IBB). Their top holdings include Amgen (NASDAQ:AMGN), Gilead Sciences (NASDAQ:GILD), Celgene , Biogen (NASDAQ:BIIB), and Regeneron Pharmaceuticals (NASDAQ:REGN).

To view its prospectus, please click here.

As for Valeant Pharmaceuticals , I wouldn't touch IT with a ten-foot pole.




Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.