Healthcare stocks have been on a roller coaster ride this year. The global trade war, U.S. politics, and a seemingly less permissive Food and Drug Administration (FDA) have all taken on a toll on the sector in 2019. Nonetheless, there are still a handful of healthcare stocks worth owning right now.
With this theme in mind, we asked three of our Motley Fool contributors for their top healthcare stock picks. They selected…
Buy the dip
George Budwell (Amarin): Earlier this month, Amarin, a mid-cap biopharma that markets the prescription omega-3 treatment Vascepa, took a big step backwards on the news that the Food and Drug Administration has decided to hold an advisory committee meeting to discuss the pros and cons of the drug’s proposed label expansion for patients with elevated triglyceride levels despite being on statin therapy. The market, in its haste, took this surprise turn of events as a sign that the FDA may ultimately reject this all-important label expansion.
As the shock of this advisory committee news has slowly worn off, Amarin’s shares have started to regain their footing. Amarin’s stock, in fact, has gained a healthy 8.3% in just the past five trading sessions. Part of what’s driving this rebound is a suite of analyst upgrades in the aftermath of this unexpected regulatory update. Roth Capital, for instance, recently reaffirmed its buy rating on Amarin’s stock and upped its price target to $31 per share. Roth, in effect, believes that Amarin’s shares could nearly double in value over the next 12 months.
Is Amarin worth the risk? While it’s flat-out impossible to predict what the FDA will do in regards to Vascepa’s proposed label expansion, the drug seems to have a better-than-average shot at getting a green light from regulators based on the publicly available data. Moreover, a rejection wouldn’t necessarily halt the drug’s red-hot commercial trajectory. Amarin, after all, already won the right to discuss Vascepa’s clinical trial data with healthcare providers — even for unapproved indications. Risk-tolerant investors, in kind, might want to buy into this rally soon.
A must-have healthcare stock
Keith Speights (Intuitive Surgical): I own quite a few healthcare stocks in my portfolio. My career has been spent primarily in healthcare. The industry continues to fascinate me. But out of all the healthcare stocks that I own, I’d say that the one I most consider as a must-have is Intuitive Surgical. I recently listed three stocks that I don’t plan on ever selling. Intuitive Surgical was one of them.
The company pioneered the use of robotic-assisted surgery with its da Vinci system. Surgeons using robots to perform surgery used to be a novelty; now it’s commonplace. And it’s becoming more prevalent as technology advances to enable more types of surgical procedures to be performed with robotic assistance.
I am a huge fan of Intuitive’s razor-and-blades business model. The company makes over 70% of its total revenue from recurring sources, including replacement instruments, accessories, and system leases. That percentage is almost guaranteed to climb as Intuitive’s install base expands and as more customers transition to leasing systems.
Intuitive Surgical faces increasing competition. However, I still expect the company to increase its market share. The overall market should grow, for one thing. Long-term demographic trends will increase demand for the types of surgical procedures for which robotic surgery is ideally suited. Intuitive also isn’t resting on its laurels and continues to innovate at a dizzying pace. My view is that the future looks brighter than ever for this great healthcare stock…
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