With the bullish sentiment that the market has taken hold since early October, stocks in nearly all industries have risen and are trading near their respective 52 week highs. However, the healthcare sector seems to have been forgotten by investors. It has been sluggish in 2012, recording gains of just 7% in 2012 compared to the S&P 500's gains of nearly 11%. Here are two large cap and two small cap healthcare picks that have been overlooked by investors and would be strong additions to any portfolio:
Johnson & Johnson's (NYSE:JNJ) stock is in the same place it was 5 years ago, pretty surprising for a company of such stability and which receives so much love from investors. JNJ is a blue chip healthcare stock that is in numerous businesses. It owns the rights to very popular products such as Tylenol and Band-Aid. Despite its global status and strong footprint with a large moat, investors have avoided the stock over short term worries as revenues haven't grown as fast as investors would like and criticism from some guy named Warren Buffett. This can be easily seen in the stock's performance year to date, managing to post a 2% loss versus healthcare ETF gains of 7%.
Despite the weakness in the stock, there has been some good news. JNJ managed to post strong earnings on Tuesday, reporting earnings of $1.41 per share, for a beat of 7 cents. This was its best quarterly performance since the first quarter of last year, when it beat earnings estimates by 9 cents. It also has been receiving some positive reviews from different authors on Seeking Alpha. One author called penned a piece about JNJ named "A Cheap Blue Chip Stock That Offers Dividend Growth And Capital Gains." Another called JNJ a strong stock for long-term gains. Notably, the stock also pays a healthy annual dividend of $2.28 per share for an annual yield of 3.6%.
Pressure BioSciences (NASDAQ:PBIO), an OTCQB company, is no different than JNJ in that struggled in 2012, being flat on the year compared to the broader market gains. It has had some ups though, rising more than 40% from the beginning of January to the end of February before falling back. PBIO is an interesting company as it has a highly touted technology platform but hasn't picked up the investor interest one would expect. The company's focus lies in proprietary laboratory instrumentation and associated consumables based on Pressure Cycling Technology ("PCT"). PCT is a patented, enabling technology platform with multiple applications in the estimated $6 billion life sciences sample preparation market. PBIO is the leading company in the world offering labs access to the powerful PCT technology.
Not that easy to understand, is it? Here is a simpler version to digest: lab sample preparation is often complex, time consuming and error-prone. With implications ranging from protein and DNA analysis used in cancer, heart disease, and other research studies to forensics used in the criminal justice system, the time it takes to prepare a sample with high quality is long and tedious, and the high error rate in preparing samples for lab analysis can be extremely costly. As a result, there is significant pent-up demand for a technology to solve these problems. This is where PBIO's game-changing PCT technology steps in. Notably, the technology has received some positive commentary from people from pretty prestigious places. Scientists from companies like Amgen, Merck, and Thermo Fisher all have spoken to the many advantages of PBIO's PCT technology.
Zacks is bullish on PBIO and has an outperform rating on the stock with a twelve-month price target on PBIO of $5.00, considerable upside from today's prices. Keep in mind, an outperform rating from Zacks has some weight behind it, as Zacks doesn't just throw it around, since only 16.7% of its covered universe has the outperform rating.
Abbot Laboratories (NYSE:ABT) is a bit different from the rest of the healthcare stocks in the list as it actually has been a strong performer over the past few months. The momentum may continue as it has a big catalyst ahead that may bring investors further gains. For some background, on October 19, 2011, the company announced that it plans to separate into two publicly traded companies, one in diversified medical products and the other in research-based pharmaceuticals. The transaction is expected to take place by the end of the year, giving investors something to look forward to.
SIGA Technologies (NASDAQ:SIGA) is a smaller stock but has a number of very bullish analysts behind it, even though its stock price has dropped from $14 to $3 a share over the past year. For some background, SIGA Technologies is a pharmaceutical company specializing in the development and commercialization of therapeutic solutions for some of the most lethal disease causing pathogens in the world - smallpox, Ebola, dengue, Lassa fever and other dangerous viruses. The stock has struggled so much over the past 52 weeks because of messy ongoing litigation with PharmaAthene (NYSEMKT:PIP).
Even though the lawsuit is still ongoing, analysts are very bullish on the stock. The stock has 3 analysts covering it with a low target of $4.50, a high target of $11, and a mean target of $7.50. The most bearish analyst on the stock suggests that the stock has upside of more than 50%. If SIGA was to reach the mean target, the stock would more than double for gains of more than 150%.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I expect to receive compensation for researching Pressure BioSciences (PBIO). This fact does not impact my thesis. I took on this opportunity because of my strong belief in the company and its assets. The views expressed are purely my own.