10 Health Care Stocks to Buy Amid the COVID-19 Recovery 

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Posted: Jul 01, 2020 2:17 AM

Ten health care stocks to buy during the ongoing recovery from the COVID-19 pandemic feature companies that focus on treating patients directly and providing them with prescription drugs that are developed to help alleviate serious ailments and diseases.

The 10 health care stocks to buy factor in rising economic activity that is taking place after governors around the country imposed restrictions in March when the number of COVID-19 cases and deaths began to spike alarmingly. These 10 health care stocks to buy stand out for their potential in an industry that has taken on increased importance as the effects of the novel coronavirus worsened.

The fallout of COVID-19 has included 10,434,835 cases and 509,799 deaths globally, along with 2,629,372 cases and 127,322 lives lost in the United States, as of June 30. America has more than double as many cases and deaths of any other nation, including China, where COVID-19 originated. Plus, a one-day spike in cases occurred in Florida, Georgia, Idaho, Tennessee and Utah on June 26 following recent public protests, reopening of businesses and resumption of activities in which many people chose not to use protective masks and social distance, as recommended by public health experts.

10 Health Care Stocks to Buy Include Bristol Myers

Bob Carlson, leader of the Retirement Watch advisory service and chairman of the Board of Trustees of Virginia’s Fairfax County Employees’ Retirement System with more than $4 billion in assets, told me he especially liked the outlook of Bristol-Myers Squibb Co. (NYSE:BMY). The pharmaceutical developer and manufacturer had incurred some problems recently that included patent losses and the assumption of hefty debt to buy Celgene that slammed its stock price and left it selling for a substantial discount to its prior value, he added.

But BMY has a high dividend yield of around 3.11% that looks to be safe, even after the debt payments from the Celgene deal, Carlson continued. In fact, S&P continued to give the company’s debt an A+ rating after the deal.

Chart courtesy of www.StockCharts.com

“The company is selling other assets and reducing expenses to increase cash flow,” Carlson said. “BMY made deleveraging and improving its balance sheet a priority.”

Bristol-Myers also has a history of managing mergers and acquisitions well, so it is likely to achieve the cost savings and benefits it projects from the Celgene deal, Carlson predicted. BMY offers a good portfolio of profitable drugs and a solid pipeline of more to come, he added.

Pension fund Chairman Bob Carlson answers questions from Paul Dykewicz during an interview before social distancing became the norm after the outbreak of COVID-19.

The company has at least maintained its dividend for more than 35 years and increased it each of the last 13 years, Carlson said. As a result, it is a stock that income investors should appreciate.

The “main risk” in buying BMY today is whether it will execute its merger plan well or remain burdened with debt from the Celgene deal, Carlson told me. The risk has a low probability of occurring, given the company’s history of successfully executing mergers, he added.

Vaccine Developer AstraZeneca Is One of the 10 Health Care Stocks to Buy 

Bryan Perry, who leads the Cash Machine, Premium Income, Quick Income Trader, Hi-Tech Trader and Breakout Profits Alert advisory services, told me he likes AstraZeneca plc (NYSE:AZN) and Johnson & Johnson (NYSE:JNJ). 

“In looking at the leading candidates to bring a COVID-19 vaccine to market, AstraZeneca’s experimental COVID-19 vaccine is probably the world’s front-runner and most advanced in terms of development, the World Health Organization’s (WHO) chief scientist said on Friday, June 26,” Perry told me. “The British drug maker has already begun large-scale, mid-stage human trials of the vaccine.”

AstraZeneca also announced that it signed supply chain agreements with Brazil’s Fundação Osvaldo Cruz, also known as Fiocruz, the country’s leading public health organization, for the capacity to produce 2 billion doses of its potential coronavirus vaccine, known as AZD1222, which was developed by researchers at University of Oxford, Perry continued. Plus, AZN sports a dividend yield of 2.59%.

The potential vaccine for COVID-19 becomes yet more effective in improving the immune response with a second dose, according to reports. In addition, the AstraZeneca partnership with Moderna (NASDAQ:MRNA) has begun discussions with Daiichi Sankyo about supplying their promising novel coronavirus vaccine in Japan. 

Chart courtesy of www.StockCharts.com

Johnson & Johnson Makes List of 10 Health Care Stocks to Buy 

A key reason why Perry said he likes Johnson & Johnson is that its COVID-19 vaccine candidate is an early entrant in the race for a treatment or a cure. Through its Janssen Pharmaceutical Companies, JNJ has accelerated the initiation of the Phase 1/2a first-in-human clinical trial of its investigational SARS-CoV-2 vaccine, Ad26.COV2-S, recombinant.

Initially scheduled to begin in September, the trial is now expected to start in the second half of July. JNJ also is in discussions with the National Institutes of Allergy and Infectious Diseases about initiating the Phase 3spike clinical trial ahead of its original schedule, pending the outcome of the Phase 1 studies and approval of regulators.

Chart courtesy of www.StockCharts.com

Another encouraging development is that the European Union is in advanced talks to reserve or buy doses of the company’s COVID-19 vaccine. Reuters reported that the European Union has authorized use of an emergency fund of $2.3 billion to reach agreements with up to six COVID-19 vaccine manufacturers. JNJ also offers a current dividend yield of 2.91%.

Paul Dykewicz interviews Bryan Perry at the MoneyShow in Orlando, Florida.

COVID-19 Testing Kit Maker Is Among 10 Health Care Stocks to Buy

Meridian Bioscience, Inc. (NASDAQ:VIVO) has added five points since it became a recommendation of Mark Skousen, PhD, just two weeks ago in mid-June. The stock already has jumped 22%.

Chart courtesy of www.StockCharts.com

Based in Cincinnati, Ohio, Meridian is a leading provider of diagnostic testing kits primarily for gastrointestinal and respiratory infectious diseases such as COVID-19. Demand for these kits has skyrocketed, Skousen told me.

To protect the quick gains, he followed his practice of boosting the stop price on the stock. Since he recommended the position in one of his premium trading services, Skousen, whose flagship investment service is his Forecasts & Strategies investment newsletter, chose to sell half of the position after it more than doubled in price. He advised holding the remainder for additional potential gains.

Mark Skousen, a descendant of Benjamin Franklin, meets with Paul Dykewicz in Philadelphia. Skousen’s premium investment services consist of Home Run Trader, Five Star Trader, TNT Trader and Fast Money Alert.

Other New Drug Developers Earn Spots Among 10 Health Care Stocks to Buy

“For weeks, any company that could even whisper about a possible vaccine program was Wall Street’s salvation, whether or not the program had any relevance to COVID-19 or any hope of getting regulatory approval in the immediate future,” said Hilary Kramer, host of a national radio program called “Millionaire Maker.” 

Columnist Paul Dykewicz interviews money manager Hilary Kramer, whose premium advisory services included 2-Day TraderIPO Edge, Turbo Trader, High Octane Tradeand Inner Circle.

However, those trades are crowded, added Kramer, who also leads the Value Authority and GameChangers advisory services. Investors who already own shares in those stocks should keep them, she advised.

“If not, don’t buy the rumor,” Kramer said. “Wait for news.”

The stocks that gain approval as COVID-19 vaccine makers from the Food and Drug Administration (FDA) first will make a few shareholders very happy, but the losers will miss the opportunity, despite pouring hefty sums of money into research and development, Kramer cautioned. 

“Instead, look to the biotech developers that got left out of the vaccine rally,” Kramer said. “People still get other diseases. Companies that come up with cures are still working hard.”

Right now, bluebird bio Inc. (NASDAQ:BLUE) and Sage (NASDAQ:SAGE) are two of the most interesting prospects, Kramer said. 

Chart courtesy of www.StockCharts.com

Chart courtesy of www.StockCharts.com

If investors are looking for small pharmaceutical manufacturers that could grow quickly, consider Kaleido (NASDAQ:KLDO) and Precision BioSciences (NASDAQ:DTIL), Kramer said. Both are at an early stage and can “work wonders” over the long term.

Chart courtesy of www.StockCharts.com

Chart courtesy of www.StockCharts.com

Bank of America Pick Cigna Is One of the 10 Health Care Stocks to Buy

Two health care stocks among those recommended at Bank of America are insurance company Cigna Corp. (NYSE:CI) and pharmaceutical services provider CVS Health Corp. (NYSE:CVS). 

The investment bank gave Cigna a price objective of $242, based on 13.4x a 2020 earnings per share estimate (EPS), below the stock’s five-year average price-to-earnings (P/E) ratio, which is a “conservative multiple” and seems justified to reflect some level of recessionary risk. Nonetheless, challenges that could hamper Cigna are deal integration risks, issues in the disability and life business, higher-than-expected costs and the potential impact of future regulatory changes.

With Cigna’s share price closing at $187.65 on June 30, it is projected to rise 28.96% if it fulfills the investment bank’s price objective. The Bernstein investment firm hiked its target on Cigna to $223 on May 4, but it downgraded the shares to “market perform” from “outperform” due to business risks associated with the coronavirus and the ongoing recession.

Cigna’s management issued a statement on April 30 cautioning that “uncertainty” about the effects of COVID-19 may cause a “wider disparity” in analysts’ consensus estimates than usual. The company’s management has offered guidance for full-year 2020 of revenues reaching $154-$156 billion and adjusted income from operations of $18-$18.60 per share for this year and $20-21 per share for 2021.

Chart courtesy of www.StockCharts.com

CVS Health Ranks Among 10 Health Care Stocks to Buy

Bank of America gave CVS Health a price objective of $80, a lofty 23.13% above the pharmacy services company’s closing price on Tuesday, June 30. Bank of America’s price target is based on roughly 10.5x its 2020 earnings per share (EPS) estimate. 

“This multiple is below the five-year average on an absolute basis and at the lower end of the historical range of 11.0x-17.5x,” according to a recent research note from Bank of America. “This also represents a bigger discount to the S&P 500 vs. the last five years. The discount reflects margin pressure across CVS’s core Pharmacy Services and Retail Pharmacy segments and uncertainty around drug prices.”

Downside “risks” to CVS achieving that price level include the possibility of Amazon (NASDAQ:AMZN) or another disruptive force entering the supply chain, failure to generate expected synergies from its Aetna transaction, any regulatory issues related to post-closing activities of that deal, growing competitive risks in the pharmacy benefit market — including competitive pricing around rebates — and ongoing operational challenges. Other risks include the highly competitive long-term care pharmacy business, business disruption tied to the COVID-19 outbreak and slowing prescription/insurance trends, according to Bank of America. 

Potential boosts to help lift CVS are a potential prescription volume pickup, faster-and-stronger-than-expected synergies from Aetna and improving front-end performance, Bank of America added. CVS also offers a dividend yield of 3.10%.

Chart courtesy of www.StockCharts.com

Stocks achieved a remarkable recovery in the second quarter ended June 30 after a COVID-19-related market crash in March of first-quarter 2020. In fact, Q2 marked the best-performing quarter for the market since 1998 and the best second quarter on record, with the S&P 500 jumping nearly 20%, while the Dow Jones Industrial Average and the NASDAQ Composite climbed 17.5% and 30%, respectively.

These 10 health care stocks to buy provide investors with a chance to profit from the COVID-19 recovery as so-called non-essential businesses reopen and begin to recall many workers who had been laid off during the recent lockdowns. Investors who tend to follow the Wall Street adage of “sell in May and go away” would have missed out on the second-quarter’s resurgence but there still is time to profit through the 10 health care stocks to buy.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business DailyUSA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is endorsed by Joe Montana, Joe Theismann, Ara Paseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others.

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