In this article we discuss 10 cheap healthcare stocks to buy now.
Healthcare remains one of the most evergreen areas for investment. The S&P 500 Health Care Sector Index is up more than 11% over the last 12 months. The industry felt the impact of the coronavirus crisis amid restrictions and unforeseen challenges, but a strong recovery is on the horizon. With a mass rollout of COVID-19 vaccinations and economy coming back to normal, analysts believe healthcare stocks are ripe for growth. The demand for COVID-19 diagnostics, therapeutics and vaccines will also help the healthcare companies in the country. But there are several organic and secular growth catalysts that will boost healthcare stocks in the long term.
Growth Catalysts for Healthcare Stocks
The problem of aging population in America presents a long-term growth opportunity for healthcare stocks, as the need for treatments, managed care and therapies will surge. Data shows that by 2030, 1 out of every 5 Americans will reach the age of retirement. There will be 78 million people 65 years and older, compared to 76.7 million under the age of 18. According to the World Health Organization, global life expectancy jumped by 5.5 years between 2000 and 2016, the fastest increase since the 1960s. This positive news also brings new challenges, especially for governments worldwide. In a McKinsey report, CEO of Dana-Farber/Harvard Cancer Center Laurie H. Glimcher said that currently $250 billion is spent to take care of Alzheimer’s patients. This will rise to $1 trillion by 2050, “enough to take down the entire U.S. healthcare system.” Healthcare companies who are spending billions in R&D will reap the benefits in the future as they make treatments for advanced and sophisticated diseases.
Burgeoning Healthcare Spending
The U.S. has the biggest healthcare industry in the world. Estimates show that healthcare spending is expected to grow at an average rate of 5.5% annually from 2018 through 2027 and reach $6 trillion. Spending on healthcare is projected to grow 0.8 percentage point faster than GDP on a year-over-year basis from 2018 through 2027.
Despite heavy spending, shiny R&D divisions and futuristic pipelines, the healthcare industry has a lot of progress to make. Over 868,000 Americans still die of heart disease or stroke every year, causing a loss of $214 billion per year and resulting in $138 billion in lost productivity on jobs. Over 1.7 million people are diagnosed with cancer every year, and about 600,000 die from it. The cost of cancer care was expected to reach $174 billion by 2020. These are the most common diseases that are easily detectable and have several treatments. There are many other advanced and rapidly evolving diseases that are completely without any treatment so far. There is a lot of room for growth and improvement for healthcare companies in the future.
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Let’s take a look at 10 cheap healthcare stocks to buy now. We chose the best healthcare stocks with PE (TTM) or Forward PE ratio less than 15. We ranked these stocks based on the number of hedge funds having stakes in the companies at the end of the third quarter. For that we used Insider Monkey’s database of over 800 hedge funds.
10. Triple-S Management Corp. (NYSE: GTS)
PE Ratio (TTM): 9.99
Triple-S Management is a managed care and health services company which offers insurance products and services primarily in Puerto Rico. The company has over one million customers. The company also operates property and casualty insurance. In November 2020, Triple-S posted Q3 non-GAAP EPS of $0.61. Revenue in the quarter jumped 12.8% and reached $942.9 million.
A total of 11 hedge funds tracked by Insider Monkey held stakes in Triple-S Management at the end of the third quarter.
Related Article: Is GTS A Good Stock To Buy Now?
9. Prestige Consumer Healthcare Inc (NYSE: PBH)
PE Ratio (TTM): 12.72
New York-based Prestige sells over-the-counter healthcare and household cleaning products. The company was created as a result of the merger between Medtech Products, Inc., Prestige Brands International and the Spic and Span Company. Prestige posted a GAAP EPS of $0.81 for the third quarter, beating the analysts’ forecasts by $0.04. Revenue in the quarter came in at $238.78 million, beating the consensus by $7.23 million.
As of the end of the third quarter, Prestige Consumer was in the portfolios of 17 hedge funds, compared to 20 hedge funds a quarter earlier. The total value of these stakes is $110.5 million.
Related Article: Is PBH A Good Stock To Buy Now?
8. Supernus Pharmaceuticals Inc (NASDAQ: SUPN)
PE Ratio (TTM): 11.95
Maryland-based Supernus makes treatment for diseases related to the central nervous system. Supernus shares rallied about 25% in December 2020 after the company said phase 3 study for its SPN-812 drug to treat ADHD in adults met its primary endpoint with “robust statistical significance.”
As of the end of the third quarter, 19 hedge funds tracked by Insider Monkey held stakes in Supernus. The total value of these stakes is $150.82 million.
Related Article: Is Supernus Pharmaceuticals Inc (SUPN) A Good Stock To Buy?
7. Walgreens Boots Alliance Inc (NASDAQ: WBA)
Forward P/E : 9.38
Walgreen Boots operates three divisions: Retail Pharmacy, Retail Pharmacy International and Pharmaceutical Wholesale. Hedge fund interest in the company declined in the third quarter, as 31 funds ended the period with the stock on their portfolios, as compared to 45 funds a quarter earlier.
Guggenheim recently lifted WBA stock rating to Buy from Neutral. The firm thinks that WBA is “finally positioned” for a potential upward earnings revision cycle. It also said the company will get a significant capital boost amid Alliance Healthcare divestiture. The firm has a $55 price target for Walgreens Boots.
Related Article: Is WBA A Good Stock To Buy According To Hedge Funds?
6. Universal Health Services, Inc. Class B (NYSE: UHS)
PE Ratio (TTM): 12.84
United Health Service operates clinics and healthcare facilities in the U.S. and U.K. The company ranks 281 on the list of Fortune 500 list. Bank of America recently gave bullish comments about healthcare facilities stocks, citing a mass vaccine rollout, improving economy and an increased consumer spending in the future.
In the third quarter, United Health Service posted a non-GAAP EPS of $2.88, beating the Wall Street estimates by $1.01. Revenue in the quarter totaled $2.91 billion, beating the Street’s estimates by $130 million.
A total of 34 hedge funds tracked by Insider Monkey are bullish on UHS.
5. Bio-Rad Laboratories, Inc. Class A Common Stock (NYSE: BIO)
PE Ratio (TTM): 5.09
California-based Bio-Rad makes specialized technological products for the life science research and clinical diagnostics markets. In the third quarter, Bio-Rad posted a non-GAAP EPS of $3, above the Wall Street’s estimate by $1.18. Revenue in the period totaled $647.3 million, which shows a 15.5% growth. This also beat the consensus by $79.95 million.
A total of 48 hedge funds tracked by Insider Monkey held stakes in the company at the end of the third quarter. The total value of these stakes is $1.2 billion. Raiv Jain’s GQG Partners increased its hold in Bio-Rad in the quarter, ending the period with 354,266 shares of the company, worth $182.61 million.
4. Biogen Inc (NASDAQ: BIIB)
PE Ratio (TTM): 8.64
Switzerland-based Biogen sells therapies for the treatment of neurological diseases. Unlike major pharmaceutical companies, Biogen does not mass-market its products and its treatments are highly expensive and offered only to a narrow customer base. The company is also known for its treatments for multiple sclerosis, leukemia and hemophilia. Biogen shares have gained over 6% in the last 30 days.
Jim Simons’ Renaissance Technologies owns 3.82 million shares of Biogen as of the end of the third quarter. The total value of these shares is $1.1 billion. A total of 59 hedge funds tracked by Insider Monkey held long positions in the company at the end of September.
Distillate Capital recently said the following about BIIB in their Q2 2020 Investor Letter:
“The biggest additions to the portfolio in the rebalance were Biogen and Philip Morris, each increasing around 30 basis points as their relative valuations improved over the quarter.”
Related Article: Is BIIB A Good Stock To Buy Now?3. Humana Inc (NYSE: HUM)
PE Ratio (TTM): 12.17
Kentucky-based Humana is one of the biggest health insurance companies in the U.S., with over 20 million members. In 2019, the company’s revenue totaled $56.9 billion. It is also a part of the Fortune 500 list. In the fourth quarter of 2020, Humana’s revenue jumped over 16% to reach $18.96 billion, beating the Street’s forecast by $200 million. For 2021, the company expects EPS in the range $21.25 to $21.75.
A total of 61 hedge funds tracked by Insider Monkey are bullish on Humana.
VLTAVA Fund said the following about Humana stock in their Q2 2020 Investor Letter:
“Humana is benefitting from a lower number of visits to physicians, which means lower insurance pay-outs for health care. This trend will most probably return gradually to normal by the end of the year.”
Related Article: Is HUM A Good Stock To Buy Now?
2. CVS Health Corp (NYSE: CVS)
PE Ratio (TTM): 12.16
Rhode Island-based CVS Health owns CVS Pharmacy chain, health insurance company Aetna and several other brands. In January, CVS stock was upgraded by Jefferies analyst Brian Tanquilut to Buy from Hold on the back of COVID-19 vaccination drive across the country. The analyst thinks that the vaccination rollout will boost the company’s earnings in the near term. The analyst also believes that strong FCF will help the company resume share buybacks in late 2021.
A total of 61 hedge funds tracked by Insider Monkey were bullish on CVS stock at the end of the third quarter, compared to 65 funds a quarter earlier.
Related Article: Is CVS A Good Stock To Buy Now?
1. Bristol-Myers Squibb Co (NYSE: BMY)
Forward P/E: 8.28
Bristol-Myers makes treatments and drugs for several diseases, including cancer, HIV/AIDS, cardiovascular disease, diabetes and rheumatoid arthritis. The stock is gaining ground after the company’s non-GAAP EPS and revenue in the fourth quarter beat estimates. Product sales in the quarter jumped 39%.
Warren Buffett’s Berkshire Hathaway is one of the 124 hedge funds tracked by Insider Monkey that reported owning stakes in Bristol at the end of the third quarter. The hedge fund owns $7.6 billion worth of BMY shares.
Wedgewood Partners recently said the following about BMY shares in their Q4 2020 Investor Letter:
“Bristol-Myers Squibb recently reported accelerating sales as much of the medical services industry returned to work. The Company continues to expect double-digit earnings growth over the next few years, driven by existing drugs, in addition to a broad pipeline of new drugs and indications. While the market remains fixated on a couple of patent expirations that could occur over the next several years, we think this is well-known at this point, yet the market still undervalues a couple of key acquisitions the Company has made in the past few years, particularly Celgene, which was acquired for a song.”
You can also read 10 Best Water Stocks and ETFs to Buy in 2021 and 15 Biggest Vaccine Companies In The World.
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This article is originally published at Insider Monkey.
