In no way do I feel the market has bottomed out or that the credit crisis has skidded to a halt, but in the words of Warren Buffet, “Be fearful when others are greedy and be greedy when others are fearful.” What does this mean for you, an investor? Invest in equities, now! In past articles I have noted that the Healthcare sector’s mistakenly being referred to as “recessionary proof” is quite a misconception; however, as a long-term investor (minimum three years), like myself, you should be “greedy.” And what a perfect time it is to be greedy.Consumer Confidence hit an all-time low of 38 in October, it’s lowest level since inception in 1967. An intelligent investor will act now.
It is time to restructure your personal portfolio, and you should look to the Healthcare sector for some growth and value. It can get a bit overwhelming when trying to find that right holding in each sub-sector in order to effectively diversify yourself and hedge against risk. You may ask yourself, should I put my hard-earned money into Pharmaceuticals, Biotech, Medical Device, Insurers, or Generics? I will touch upon all of these sub-sectors and answer your much needed questions. The stocks that I will discuss below will provide additional protection on the downside, and some will take your portfolio to new levels.
1. Gilead Sciences Inc. - Biotechnology
A few months ago I wrote an article about the concerns many investors had over Gilead (GILD: 45.91, 0.00 (0.00%)) missing earnings in the 2nd Quarter. Well, my predictions were true that the concerns would not last too much longer. Analysts said, “Too much saturation in the market” and “Historical growth can’t continue.” So what happened in their most recent earnings? Gilead reported 3rd Quarter EPS of $0.55 versus analyst consensus of $0.52 EPS. Product sales increased 39% to a record of $1.34 billion primarily lead by their “best in class” antiviral franchise. The largest contributors to the antiviral business were Truvada and Atripla, increasing 34% and 77% respectively for the quarter. In the past year or so, Gilead has intensified their marketing initiatives and has been able to effectively penetrate the European Union, which has been a main factor contributing to such a large hike in sales revenue. Huge news came in August when the FDA approved Viread for the treatment of chronic HBV in adults, and Gilead remains committed to working with physicians in an attempt to switch patients from similar but less effective therapies to Viread. Probably the most impressive aspect of Gilead, aside from their complete dominance in the HIV/AIDS market, is the superb fundamentals. Return on Equity of 51.61%, Return on Assets of 30.01%, low Debt/Equity of 0.32, and a projected EPS Long-Term Growth Rate of 26.43%. As you can see by some of these numbers, Gilead will offer a great return on your investments and a huge upside as noted by the LT EPS growth rates through their continuous penetration of the United States and international markets.
- Market Cap: $43.20 Billion
- Trailing P/E: 24.55
- Forward P/E: 19.71
- ROA: 30.01%
- ROE: 51.61%
- Debt/Equity: 0.32
- LT EPS Growth Rate: 26.43%
2. Abbott Laboratories - Pharmaceuticals
By now you know that I am not a huge fan of pharmaceuticals, especially the large-caps; however, Abbott Laboratories (ABT: 55.32, 0.00 (0.00%)) is definitely an exception. Abbott is strategically broken down into three major business segments depending on how you specifically dissect the firm. Within the Medical Products segment are Abbott Vascular, Diagnostics, and Diabetes Care. Abbott is notarized for its blockbuster drug, HUMIRA, which in the most recent quarter showed sales increasing 50% to $1.2 billion including 67% international growth.
