Aetna Inc. (AET), Auxilium Pharmaceuticals, Inc. (AUXL), and ArthroCare Corporation (ARTC): 3 Healthcare Stocks to Avoid

The company will continue to face problems throughout 2013 with tough competition to its Testim franchise. The drug has strong competition from AbbVie Inc (NYSE:ABBV)’s AndroGel, and Actavis Inc (NYSE:ACT) is also preparing to market its own generic version in mid-2015. These will significantly affect the approximately $250 million in sales the company generates from Testim. Due to these headwinds and no current pipeline catalysts, investors should stay away from Auxilium Pharmaceuticals, Inc. (NASDAQ:AUXL).

ArthroCare Corporation (NASDAQ:ARTC) is a medical devices company and is involved in the development and commercialization of surgical products. The company also offers sports medicine products, including ArthroWands, surgical wands, soft-tissue fixation products, etc. Over the last 52 weeks, the stock has fluctuated between $24 and $37. The sell side has a mean target price of $39, which translates into a 16% upside to current valuations.

In the last six months, institutions have sold approximately 2.6 million shares of the company, reducing total ownership by 11%. During the same period, insiders have sold 70,500 shares of ArthroCare Corporation (NASDAQ:ARTC), reducing insider ownership by 21%. One of the primary reasons behind the insiders and institutions selling their stock is the superb 34% run in the last 52 weeks. I believe there are not enough catalysts to take the price higher, and investors should stay away from the company because insiders and institutional investors are already taking profits.

Bottom line

The three companies discussed above have seen insider or institutional selling in the last six months. Moreover, there are no strong catalysts to push up the stock price which significantly limits their upside potential. Therefore, investors should stay away from these stocks until more solid catalysts emerge.

The article 3 Healthcare Stocks to Avoid originally appeared on Fool.com and is written by Mohsin Saeed.

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