With earnings reporting for the second quarter all but over, and the summer starting to wind down, many of the top companies we follow on Wall Street are making some changes to the lists of their high-conviction stock picks for clients. With the market showing the potential for some sizable rotation, it makes sense to examine the lists and make some changes because the rest of the year could have additional volatility, as the political and geopolitical cycle could prove to be very explosive components.
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The research team at BofA Securities made two changes to the firm’s US 1 List of top stocks to buy. Hill-Rom Holdings Inc. (NYSE: HRC) was removed from the list but remains Buy rated, and Medtronic PLC (NYSE: MDT) was added. The analysts also made changes to the weighting methodology and the committee process for the US 1 list during the last changes to the portfolio, so we have them again for review:

Going forward, the list will be weighted based on market capitalization, and will allocate 2% for stocks with <$100 billion market cap, 4% for stocks with $100-$400 billion market cap, and 6% for any stocks with greater than $400 billion market cap. To the extent that any security selection causes the list allocation to exceed or fall short of 100%, this excess/shortfall will be allocated equally across all stocks in the list.

Here we cover the new medical technology stock that was added and also screened the US 1 list for additional stocks in the health care sector, While all four are outstanding ideas for investors, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Medtronic

This medical technology giant is a solid pick for investors looking for a safe position in the health care sector, and it is the newest member of the US 1 list. Medtronic develops, manufactures, distributes and sells device-based medical therapies to hospitals, physicians, clinicians and patients worldwide.

The company announced earlier this summer that Blackstone’s life sciences division will invest $337 million into the research and development of its diabetes device technologies. Under the terms of the agreement, Medtronic will receive funding for four diabetes programs over the next several years. Medtronic’s engineering, clinical and regulatory teams will conduct the development work for the programs.

Blackstone’s investment is sought to pull forward specific programs for its diabetes pump and continuous glucose monitoring pipeline devices that aim to address unmet patient needs. If the programs are successful, Medtronic will pay royalties that are expected to be in the low- to mid-single-digit range as a percentage of sales.

Investors receive a 2.28% dividend. The BofA Securities price target for the shares is $130, and the Wall Street consensus target is $110.17. Medtronic stock closed Monday’s trading at $101.86.

Bristol-Myers Squibb

This remains a solid pharmaceutical stock to own long term. Bristol-Myers Squibb Co. (NYSE: BMY) is a global pharmaceutical company focused on discovering, developing, licensing and marketing chemically synthesized drugs or small molecules and biologics in various therapeutic areas, including virology comprising human immunodeficiency virus infection (HIV), oncology, neuroscience, immunoscience and cardiovascular.

The company reported strong second-quarter results that were largely ahead of Wall Street consensus, given the ongoing recognition of Celgene revenue. Bristol-Myers bought Celgene last year in a massive $74 billion acquisition. The posted quarterly earnings of $1.63 per share exceeded the Wall Street consensus estimate and were higher than the per-share earnings reported in the same period a year ago.

Shareholders receive a 2.83% dividend. BofA Securities has an $80 price target, while the consensus target is $72.08. Bristol-Myers Squibb stock closed at $63.62 on Monday.

This is a solid value buy in the health care sector. Cigna Corp. (NYSE: CI) is a major health services organization that provides insurance and related products and services in the United States and internationally. All products and services are provided exclusively by or through operating subsidiaries of Cigna, including Cigna Health and Life Insurance Company, Life Insurance Company of North America, Cigna Life Insurance Company of Canada and their affiliates.
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The health care giant offers an integrated suite of health services, such as medical, dental, behavioral health, pharmacy, vision, supplemental benefits and other related products, including group life, accident and disability insurance. Cigna maintains sales capability in 30 countries and jurisdictions, and it has approximately 86 million customer relationships throughout the world.

Cigna has a partnership relationship with (and an equity stake in) MDLive for telehealth. Increased telehealth adoption should also translate to a shift in prescription fulfillment to nonphysical pharmacy locations, which should benefit the company’s Express Scripts business, which operates the largest mail pharmacy in the United States.

The $242 BofA Securities price target compares to the $243.76 consensus figure. Monday’s last trade of Cigna stock was reported at $182.19 a share.

Immunomedics

This is the only true biotechnology stock on the US 1 list. Immunomedics Inc. (NASDAQ: IMMU), a clinical-stage biopharmaceutical company, develops monoclonal antibody-based products for the targeted treatment of cancer. Its advanced antibody-drug conjugates are sacituzumab govitecan and labetuzumab govitecan, which are in advanced trials for various solid tumors and metastatic colorectal cancer, respectively.

The company focuses on commercializing sacituzumab govitecan as a third-line therapy for patients with metastatic triple-negative breast cancer in the United States. The company also develops IMMU-140, a humanized antibody directed against an immune response target.

Its other product candidates include products for the treatment of cancer and autoimmune diseases, including epratuzumab, an anti-CD22 antibody; veltuzumab, an anti-CD20 antibody; milatuzumab, an anti-CD74 antibody; and IMMU-114, a humanized anti-HLA-DR antibody. Immunomedics has clinical collaboration with AstraZeneca and MedImmune to evaluate Imfinzi, a human monoclonal antibody against PD-L1, with sacituzumab govitecan as a frontline treatment of patients with TNBC and urothelial cancer.

It also has a collaboration agreement with Bayer Group for the development of epratuzumab; clinical and preclinical collaborations with academic cancer institutions, identifying new cancer indications for sacituzumab govitecan and the biology of the Trop-2 antigen; and research collaboration with the Memorial Sloan Kettering Cancer Center to investigate sacituzumab govitecan and labetuzumab govitecan in preclinical cancer models.

BofA Securities has set a $50 price target. The consensus target is $55, and Immunomedics stock closed at $41.84 per share.

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Given the huge market moves this year, it may be wise to buy partial positions and see if we don’t indeed get a sizable pullback, as August and September are typically months in which investors should be careful. That noted, all of these stocks are great additions to long-term growth portfolios.

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