Investor Sentiment Is Horrible and Fund Outflows Are Huge: RBC Says Stay Positive

By Lee Jackson Updated Jan 13, 8:00AM EST · Published May 16, 10:45AM EDT

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Investor Sentiment Is Horrible and Fund Outflows Are Huge: RBC Says Stay Positive — © Thinkstock

[cnxvideo id=”655416″ placement=”ros”]After a nice run off the lows of February, the market has hit a wall and pessimism is creeping back in. Worries about everything from the potential departure of Great Britain from the European Union, to the U.S. political situation, to anxiety over China, have contributed to some of the largest equity fund outflows in years — outflows not seen since the Great Recession days of 2008 and 2009.

In a new research report, the technical team at RBC acknowledge that all the above is helping to apply pressure, but they remain positive and feel that any weakness in this quarter and the next one may be an outstanding time to add to positions.

One of the sectors they highlight as among the improving relative performers is health care, and three companies look very good now to the RBC team.

Medtronic

This company is now based in Ireland after the gigantic merger with Covidien in 2015. Medtronic PLC (NYSE: MDT) is a medical devices giant, and many on Wall Street saw this historical merger, probably one of the largest in the Medtech industry, as a momentous event, leading to the creation of a unique company that combines the extensive and innovative abilities of both Medtronic and Covidien. The combined company officially has joint forces of over 85,000 employees present in more than 160 countries.

Top analysts feel that the contributions from Medtronic’s three growth drivers, which they cite as therapy innovation, globalization and services/solutions, should support a 5% or greater constant currency top-line growth this year and beyond. Some also feel that the Covidien earnings potential is underappreciated, and the change in domicile is also a positive.
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The company is also still pursuing a huge new restructuring move that is expected to free up $9.3 billion in cash, which can help pay down debt, buyback shares or maybe even help with a selective acquisition.

Medtronic investors are paid a 1.88% dividend. The Thomson/First Call consensus price target for the stock is $84.62. Shares closed most recently at $80.71.
Waters

This is another top company that has acted extremely well. Waters Corp. (NYSE: WAT) operates as an analytical instrument manufacturer in the United States and internationally. The company’s Waters division designs, manufactures, sells and services high-performance liquid chromatography, ultra performance liquid chromatography and mass spectrometry technology systems and support products, including chromatography columns, other consumable products and post-warranty service plans.

The company’s TA division offers thermal analysis, rheometry and calorimetry instruments, which are used in predicting the suitability of fine chemicals, pharmaceuticals, water, polymers and viscous liquids for uses in various industrial, consumer goods and health care products, as well as for life science research.

The company also develops and supplies software-based products that interface with its instruments. Its products are used by pharmaceutical, life science, biochemical, industrial, nutritional safety, environmental, academic and governmental customers working in research and development, quality assurance and other laboratory applications.

The consensus price target for the stock is set at $139.25. The stock closed the day on Friday at $134.76 per share.

Zimmer Biomet

This was another huge 2015 merger that Wall Street has been very positive on. Zimmer Biomet Holdings Inc. (NYSE: ZBH) is a global leader in musculoskeletal health care. It designs, manufactures and markets orthopaedic reconstructive products; sports medicine, biologics, extremities and trauma products; spine, bone healing, cranio maxillofacial and thoracic products; dental implants; and related surgical products.

The company reported outstanding quarterly results at the end of April, beating consensus earnings and revenue estimates. The company also raised its outlook for the year as it posted a merger-driven sales surge, though an increase in expenses led to a decline in profit. The company also announced recently it would acquire Cayenne Medical to strengthen its sports medicine offerings.

Shareholders are paid a small 0.82% dividend. The consensus price target is posted at $126.48. The stock closed Friday at $117.44.
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Three solid health care ideas that are posting good numbers and expanding their product silos in an effort to continue to add new business. These all look good for more aggressive growth accounts.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.