With the first half of what has proven to be a remarkable 2020 coming to a close, many of the firms we cover across Wall Street already are looking to the second half of the year, with what should be an improving economy as we emerge from the COVID-19 pandemic lockdowns. One thing’s for sure: The rally everybody was looking to arrive in the second half of the year may have come already.

Despite the sell-off on Tuesday, the S&P 500 has made a stunning reversal off the March 23 lows, recouping almost all the losses, while the Nasdaq composite index actually printed an all-time high on the strength of the mega-cap tech giants.

Jefferies analysts were tasked recently with providing their 50 top high-conviction ideas for the second half of 2020 and beyond. They noted this in the research report:

We present the US Research team’s current top ideas, spanning all sectors under coverage. With representation from nearly every publishing analyst, we highlight 50 stocks we find particularly attractive. These are our highest conviction ideas, regardless of theme or macro backdrop, and include our Franchise Picks.

We screened the health care picks, as the sector has solid momentum heading into the second half of 2020, and found five solid ideas for long-term growth investors.

Amedisys

This leading health care stock is a pure-play on an aging nation. Amedisys Inc. (NASDAQ: AMED) provides health care services in the United States. It operates through three segments. The Home Health segment offers a range of services in the homes of individuals for the recovery of patients from surgery, chronic disability or terminal illness, as well as prevents avoidable hospital readmission through its skilled nurses; rehabilitation therapists specialized in physical, speech and occupational therapy; and social workers and aides for assisting its patients.

The Hospice segment offers services that are designed to provide comfort and support for those who are dealing with a terminal illness, including heart disease, pulmonary disease, Alzheimer’s or cancer. The Personal Care segment provides assistance for patients with the activities of daily living. As of February 18, 2020, the company owned and operated 479 care centers in 38 states and the District of Columbia.

The analysts said this:

Amedisys is the largest player in home health (#1 home nursing, #3 hospice), well-positioned to benefit from the accelerating shift in care delivery from nursing homes and other high-cost facility-based settings to the home. The company is on track to deliver high single digit organic growth in 2021 and beyond, while management’s aggressive M&A push should contribute incremental growth and also yield earnings upside surprises. Amedisys has already announced a relatively large acquisition in hospice, which should push 2021 estimates higher over the next few weeks.

Jefferies has a $225 price target for the shares, while the Wall Street consensus target is $213.08. Amedisys stock closed Tuesday at $176.42 a share.

BioMarin Pharmaceuticals

This Wall Street favorite was a recent addition to the Jefferies Franchise Picks list. BioMarin Pharmaceuticals Inc. (NASDAQ: BMRN) develops and commercializes innovative biopharmaceuticals for serious diseases and medical conditions. Its product portfolio comprises five approved products and multiple clinical and preclinical product candidates.

Over the past decade, BioMarin has become one of the top orphan drug companies, and it looks poised to stay there.  Roche recently has been mentioned as a company that could be looking at BioMarin. Roche is focused on oncology drugs and invests heavily in early-stage molecules.

The consensus earnings forecast for 2020 has been scaled down by a penny per share. However, the full-year 2021 estimate has been lifted to $1.20 per share from the previously forecast $1.13.

The analysts noted this:

Our proprietary work leads us to believe that upcoming launches for valrox and vosoritide are likely to ramp faster than consensus expectations. We forecast a revenue compounded annual growth rate of 17% thru 2024.

The Jefferies price objective is $132, but the consensus target is way below that figure at $120.18. BioMarin stock closed at $105.09 on Tuesday.

This has been touted as a potential takeover target, as it may be a very solid fit for a big medical devices player. Haemonetics Corp. (NYSE: HAE) provides products for processing, handling and analysis of blood.

The company offers plasma collection and storage products, including PCS brand plasma collection equipment and disposables, plasma collection containers and intravenous solutions, as well as information technology platforms for plasma customers to manage their donors, operations and supply chain.

Jefferies has been positive on this company for years and said this:

We continue to have conviction in our bull thesis for the company despite COVID-19 and recessionary headwinds due to: 1) immunoglobulin (Ig) demand in elasticity; 2) plasma counter-cyclicality relative to unemployment; and 3) NexSys upside potential. Although COVID has pressured patient visits to infusion clinics for administration of IV therapy, the underlying illnesses being treated are all chronic conditions. The impact to plasma collections due to social distancing has only worked to further enhance the value proposition behind NexSys, which is also the only solution on the market that is proven to increase yields with each donation.

The stunning $165 Jefferies price target compares with a $137 consensus target. The stock was last seen trading at $98.67.

Horizon Therapeutics

This may be a great play for more speculative accounts. Horizon Therapeutics PLC (NASDAQ: HZNP) focuses on researching, developing and commercializing medicines that address unmet treatment needs for rare and rheumatic diseases in the United States and internationally.

The company’s orphan and rheumatology marketed medicines include Krystexxa, a medicine for the treatment of uncontrolled gout; Ravicti for use as a nitrogen-binding agent for chronic management of adult and pediatric patients; Procysbi for nephropathic cystinosis, a rare and life-threatening metabolic disorder; Actimmune for chronic granulomatous disease; Rayos for the treatment of multiple conditions, including rheumatoid arthritis; Buphenyl tablets for oral administration and Buphenyl powder for oral, nasogastric or gastrostomy tube administration; and Quinsair, a formulation of the antibiotic drug levofloxacin for the management of chronic pulmonary infections due to pseudomonas aeruginosa in adult patients with cystic fibrosis.

Jefferies noted this:

The company’s two lead biologic drugs have no current competition, are long duration assets and have combined peak sales potential of $2-3B. Refractory gout drug Krystexxa is annualizing at $400M+ and growing 25%+ Y/Y and we forecast peak potential sales of $1B+. Just launched thyroid eye disease drug Tepezza has peak sales potential of $1 billion+ and may already be annualizing at $250M + after just four months on the market. We expect 20%+ annual growth over the next 3-4 years irrespective of the macro-economy.

The Jefferies price objective is $55. The consensus target is $52.70, and shares ended Tuesday trading at $48.16 apiece.

Zimmer Biomet

This large-cap medical devices play may be better suited for more conservative growth accounts. Zimmer Biomet Holdings Inc. (NYSE: ZBH) designs, manufactures and markets musculoskeletal health care products and solutions globally.

The company provides orthopedic reconstructive products, such as knee and hip replacement products; SET products, including surgical, sports medicine, biologics, foot and ankle, extremities and trauma products; spine products, comprising medical devices and surgical instruments; and face and skull reconstruction products; as well as products that fixate and stabilize the bones of the chest to facilitate healing or reconstruction after open heart surgery or trauma, or for deformities of the chest.

Zimmer Biomet also offers dental products, including dental reconstructive implants and dental prosthetic and regenerative products, and bone cement and office-based technology products. The company’s products and solutions are used to treat patients suffering from disorders of, or injuries to, bones, joints or supporting soft tissues.

Jefferies likes the value at current levels:

Zimmer Biomet has underperformed all other large cap device names through COVID despite a number of data points suggesting a recovery in orthopedics is occurring at a good pace. Stock is also the cheapest in the group: 17 times 2021 consensus versus 21.5 for large cap med-tech peers. Beyond the COVID recovery, new products, including robotics, and general improvements in manufacturing and other aspects of the business are expected to push growth higher on an underlying basis.

Shareholders receive a 0.72% dividend. Jefferies has set a $137 price target. The consensus target is $137.58, and Zimmer Biomet stock closed Tuesday’s trading at $134.14.

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These five high-conviction health care ideas from Jefferies make sense for accounts looking to gain exposure to a sector that should continue to do well the rest of 2020 and for years to come, given the aging population both here and around the world. That said, it’s clear the market is overbought, and with the quarter ending and portfolio managers looking to put some gains on the book, it makes sense to buy partial position now.

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