With the S&P 500 down nearly 4% over the past 2 days and even Apple (AAPL), one of the hottest stocks on the market over the past decade, down 7%, money managers have begun to look at more stable asset classes to put their money in. The popular safe-haven over the past 5 years has been gold. Bonds have also been a favorite but yields are currently some of the lowest the country has ever seen. For people looking to rotate into equities with stable business profiles, defensive industries such as healthcare may be one of the best ways to withstand the volatility. Here are three healthcare stocks that should provide downside protection for a portfolio in case the weakness in the market is more protracted than expected.
Thermo Fisher (TMO) is the world leader in serving science. With revenue of $12 billion, the company has approximately 39,000 employees and serves customers within pharmaceutical and biotech companies, hospitals and clinical diagnostic labs, universities, research institutions and government agencies, as well as in environmental and process control industries. The company's products and services help its customers solve complex analytical challenges, improve patient diagnostics and increase laboratory productivity.
TMO just reported Q3 earnings a few weeks ago that beat the consensus estimate. The company also raised guidance. Both of those news items combined to send the stock up 5% on the day as the market became more optimistic about the company's future. Analysts followed suit, and boosted their price targets on the shares. The big opportunity going forward for Thermo Fisher is the world's greater access to healthcare and the aging population, which should increase the market opportunities for the company's products.
Last week, the company's subsidiary, Cole-Parmer, quietly put out a press release that the financial markets seemed to have over looked. Cole-Parmer agreed to carry the PBI Shredder SG3 System, which is manufactured and owned by Pressure BioSciences (OTCQB: PBIO). This could end up being a significant opportunity for PBIO because Cole-Parmer happens to be one of the world's largest and most recognized distributors of lab equipment and supplies. Cole-Parmer's catalogs land in the hands of most if not all of the people who run laboratories all over the world. With Thermo Fisher's backing, Cole-Parmer's many decades of experience and hundreds of thousands of customers, and a new distribution platform, this deal has the potential of developing into a long and profitable relationship for PBIO as the relationship develops and Cole-Parmer adds more of PBIO's products to its catalog.
The benefit of the PBI Shredder SG3 System comes in the form of achieving improved safety and sample integrity, better versatility, and longer DNA. The instrument is ideal for the extraction of DNA, RNA, protein, mitochondria, and small molecules - a routine process done in thousands of labs. The device offers a unique a closed system in which to safely prepare samples compared to its competitors that are generally open systems. The PBI System is also portable for easy and efficient field collection. The PBI Shredder SG3 System is already available for purchase on Cole-Parmer's website. PBIO competes in the estimated $6 billion life sciences sample preparation market. As a small, rapidly growing company, it seems to make a lot of sense for PBIO to team up with one of the biggest and best in its industry.
Abbott (ABT) is one of the largest healthcare stocks with a market cap of nearly $100 billion. The opportunity in ABT comes in the form of its upcoming split into two companies. Seasoned investors know that spin-offs generally tend to outperform the market and this may very well be the next stock to join the list.
The plan is separate into two publicly traded companies, one in diversified medical products and the other in research-based pharmaceuticals. The diversified medical products company will consist of Abbott's existing diversified medical products portfolio, including its branded generic pharmaceutical, devices, diagnostic and nutritional businesses, and will retain the Abbott name. The research-based pharmaceutical company will include Abbott's current portfolio of proprietary pharmaceuticals and biologics and will be named later.
Biogen (BIIB) has risen over 20% year-to-date compared with a 10% gain for the S&P 500. Biogen has two major drugs, Avonex and Tysabri, which it relies on for growth and cash flow. But the big opportunity in Biogen lies in its pipeline, as BG-12 is said to revolutionize the multiple sclerosis market. Some have even said that BG-12, currently under FDA review, may be a blockbuster. Q3 results were solid for the company as the EPS figure beat analyst estimates by 25 cents while revenue rose 6% year/year. Despite the recent down tick in the shares, the stock has seen support from analysts, as Leerink Swann recently called the shares attractive for long-term investors.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.