It is hard to believe, but in just over two weeks the second quarter will come to a close and many investors will be reviewing their portfolios and making changes for the second half of 2021. One thing is looking increasingly likely. At some point in the second half, the Federal Reserve will start tapering its $120 billion per month in asset purchases. That surely will trigger some angst, and we could see a market decline of 5% to 10%.
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It makes sense now to move from the momentum and meme stocks to those of companies and sectors that should continue to be the bellwether plays for the rest of 2021. One sector that looks very strong is health care and health-care-related stocks. Four stocks on the Jefferies Franchise List of top picks may be outstanding ideas from growth stock investors with a degree of risk tolerance.
While all four stocks are rated Buy at Jefferies it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
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Bio-Rad Laboratories
This is a perfect idea for investors looking to avoid clinical decision risk. Bio-Rad Laboratories Inc. (NYSE: BIO) develops, manufactures and markets life science research and clinical diagnostic products in the United States, Europe, Asia, Canada and Latin America.
The company offers products and systems to separate complex chemical and biological materials, as well as to identify, analyze and purify components. It operates in two segments.
The Life Science segment develops, manufactures and markets a range of reagents, apparatus and laboratory instruments that are used in research techniques, biopharmaceutical production processes and food-testing regimes. It focuses on selected segments of the life sciences market in proteomics, genomics, biopharmaceutical production, cell biology and food safety. This segment serves universities and medical schools, industrial research organizations, government agencies, pharmaceutical manufacturers, biotechnology researchers, food producers and food-testing laboratories.
The Clinical Diagnostics segment designs, manufactures, sells and supports test systems, informatics systems, test kits and specialized quality controls for clinical laboratories in the diagnostics market. This segment offers reagents, instruments and software that address specific niches within the in vitro diagnostics test market. It sells its products to reference laboratories, hospital laboratories, state newborn screening facilities, physicians’ office laboratories, transfusion laboratories and insurance and forensic testing laboratories.
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The company posted massive first-quarter results, and Jefferies now has a sizable $725 price target on the shares. The consensus target across Wall Street is even higher at $755, and the last Bio-Rad Laboratories stock trade on Friday came in at $601.68 a share.
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CVS Health
This top stock for more conservative accounts offers a very solid entry point. CVS Health Corp. (NYSE: CVS | CVS Price Prediction) is one of the largest health care companies in the United States, providing retail, mail and specialty pharmacy dispensing services and pharmacy benefits. CVS has become one of the most vertically integrated publicly traded health care companies.
CVS serves employers, insurance companies, unions, government employee groups, health plans, prescription drug plans, Medicaid managed care plans, plans offered on public health insurance and private health insurance exchanges, other sponsors of health benefit plans and individuals. This segment operates retail specialty pharmacy stores and specialty mail order, mail order dispensing, and compounding pharmacies, as well as branches for infusion and enteral nutrition services.
CVS completed a $69 billion purchase of health care provider Aetna in November of 2018 and remains one of the top picks for 2021 and beyond, as CVS has become one of the most vertically integrated publicly traded health care companies
Investors in CVS Health stock receive a solid 2.35% dividend. The Jefferies price target is $95, while the posted consensus price target is $94.29. The shares ended Friday trading at $85.47 apiece.
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Gilead Sciences
This stock is trading a very reasonable 9.75 times estimated 2021 earnings. Gilead Sciences Inc. (NASDAQ: GILD) is a biopharmaceutical company that discovers, develops and commercializes therapies for the treatment of HIV/AIDS, liver disease, cancer and inflammation. The acquisition of Kite Pharmaceutical in 2017 allowed for entry into the CAR-T space, indicating a renewed focus in oncology.
The company’s products include Stribild, Complera/Eviplera, Atripla, Truvada, Viread, Emtriva, Tybost and Vitekta for the treatment of human immunodeficiency virus (HIV) infection in adults, as well as Harvoni, Sovaldi, Viread and Hepsera products for the treatment of liver disease.
Gilead Sciences also offers Yescarta, Tecartus, Trodelvy and Zydelig products for the treatment of hematology, oncology, and cell therapy patients. In addition, its Letairis is an oral formulation for the treatment of pulmonary arterial hypertension. Ranexa is an oral formulation for the treatment of chronic angina. AmBisome is a liposomal formulation for the treatment of serious invasive fungal infections.
Gilead Sciences has collaboration agreements with Arcus Biosciences, Pionyr, Tizona, Tango Therapeutics, Jounce Therapeutics, Galapagos, Janssen, Japan Tobacco, Gadeta, Bristol-Myers Squibb, Merck and Novo Nordisk.
Investors receive a very enticing 4.13% dividend. The $80 Jefferies price target is higher than the $74.49 consensus price target. Gilead Sciences stock ended last week’s trading at $68.77 per share.
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STARR Surgical
This is an outstanding idea for aggressive growth investors looking for health care exposure, and it is one of the newest additions to the Franchise Picks list. STARR Surgical Co. (NASDAQ: STAA) designs, develops, manufactures, markets and sells implantable lenses for the eye, as well as companion delivery systems to deliver the lenses into the eye.
The company provides Visian implantable Collamer lens (ICL) product family to treat visual disorders, such as myopia, hyperopia, astigmatism and presbyopia. Hyperopic ICL treats far-sightedness. It also offers preloaded silicone intraocular lenses, as well as preloaded injectors for use in cataract surgery. In addition, the company sells injector parts and other related instruments and devices. STAAR Surgical markets its products to health care providers, including ophthalmic surgeons, vision and surgical centers, hospitals, government facilities and distributors.
The Jefferies team is very positive on the company and noted this when adding the stock to the Franchise List earlier this month:
Our conviction in STAA shares is based on our proprietary surveys of both refractive surgeons (n=50) and consumers (n=750), along with our bottom’s up total addressable market analysis. Collectively, the data suggests that the EVO Visian ICL could replace the current gold standard LASIK as the lead US refractive surgical option within 3-5 year post launch (expected late 2021). Our sum-of-the-parts analysis supports ~$90-$110 for the myopia opportunities alone, suggesting the current valuation bakes in minimal contribution from Viva in presbyopia markets.
Jefferies has set a $150 price target. The $138.00 consensus is also lower than Friday’s closing share price of $147.01.
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These four outstanding stocks in the health care space offer plenty of upside potential for investors long term and look like very solid ideas for the rest of 2021, especially with an overbought and pricey market.
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