Top Healthcare Stocks for 2020
January 08 2020 - Why You Should Keep An Eye On These 5 Leading Health Care Stocks By Investors Business Daily
The U.S. soon will spend nearly 20% of its gross domestic product on health care. This comes as health care costs outpace the rise in inflation. So, health care stocks are in the limelight.
Smart investors can cash in by eyeing key health care stocks. Headlines abound for biotech and pharma stocks with cutting-edge medicines. But health care stocks actually comprise a broader swath of medical companies — many of which are behind the scenes.
All of these health care stocks share several commonalities: A streak of bullish earnings growth, as well as high Composite and Relative Strength ratings. The CR measures key growth metrics while the RS Rating looks at a stock's 12-month performance against all other stocks.
A New IPO Stock Lands On IBD 50
InMode is a newer health care stock after going public in August 2019. As of the close Dec. 31, InMode stock was 180% north of its initial public offering at 14. Now, the health care stock belongs to the IBD 50 list of elite growth stocks where it ranks first.
The company is developing medical aesthetics devices that use radio-frequency technology. It has offerings in plastic surgery, gynecology, dermatology, otolaryngology — or ears, nose and throat — and ophthalmology.
In the third quarter, InMode sales popped 57% to $40 million. Adjusted earnings increased 77% to 46 cents per share. The health care stock has now tacked on at least double-digit sales and profit growth for three consecutive quarters.
A key caveat: Shares of InMode are lightly traded in terms of volume. So it's less well known than larger health care stocks like Intuitive Surgical (ISRG) or Dexcom (DXCM). But InMode stock leads its industry group with a best-possible Composite Rating of 99, a measure of key growth metrics.
The health care stock also has a perfect Relative Strength Rating of 99. This puts InMode stock in the top 1% of all stocks in terms of stock performance.
On Investor's Business Daily's MarketSmith.com list of fastest-growing companies — a measure of five-year earnings growth rates — InMode stock ranks second. The company's earnings have grown 328% over the past five years.
It's important to note, InMode stock isn't currently forming a definitive chart pattern.
Vertex Is A Leading Health Care Stock
Vertex is a leader in treating cystic fibrosis, a chronic and deadly lung disease.
The health care stock is now tied with Arrowhead Pharmaceuticals (ARWR) and Regeneron Pharmaceuticals (REGN) for first place in its industry group, ranked by IBD Digital. The industry group includes nearly 600 biotech stocks.
Vertex makes four treatments for cystic fibrosis. The fourth to gain approval is designed to treat 90% of patients with the lung disease. Known as Trikafta, the medication grabbed Food and Drug Administration approval in late October.
On MarketSmith.com's list of fastest-growing stocks, Vertex stock is ranked No. 28 out of 150 with a five-year profit growth rate of 111%. That's reflected in the health care stock's bullish EPS Rating of 97.
The biotech company has posted six straight quarters of at least double-digit sales and earnings growth. Notably, Vertex earnings growth decelerated in the third quarter, rising 13% vs. 34% in the prior period. Likewise, sales grew 21% vs. 25% growth in the second quarter.
Vertex stock has a perfect Composite Rating of 99 and a strong Relative Strength Rating of 87. Leading stocks tend to have Relative Strength Ratings of at least 80.
Shares of Vertex broke out of a consolidation with a buy point at 195.91 in late October. As of the close on Jan. 2, Vertex stock was roughly 12% extended from that entry. Investors are encouraged to take some profits when a stock rises 20%-25% above its buy point.
Another Fast-Growing Health Care Stock
Amedisys provides home health and hospice services.
In October, the health care stock reported service revenue of $494.6 million for its third quarter ended Sept. 30, 2019. That climbed 19% year over year.
Amedysis earnings have grown by a double-digit percentage for the past 12 quarters. The health care stock has now reported three consecutive quarters of double-digit sales growth.
Further, the health care stock announced its acquisition of hospice provider Asana Hospice in late November. The takeover wrapped up on Jan. 2. With it, Amedysis added eight new locations in Pennsylvania, Ohio, Texas, Missouri and Kansas.
On MarketSmith.com's list, Amedisys stock ranks No. 68 with a five-year earnings growth rate of 44%.
Amedisys leads its industry group with a perfect Composite Rating of 99. Shares of the health care stock also have a bullish Relative Strength Rating of 92.
Shares of Amedysis topped a buy point at 137.50 out of a double-bottom base in late October. The health care stock is now in a profit-taking zone, about 21% above that entry.
Repligen: A 'Surgeon' For Biologic Drugmakers
Repligen stock ranks third among medical-products stocks. It trails heart-valve replacement company Edwards Lifesciences and Globus Medical (GMED), a maker of musculoskeletal devices.
The medical stock is a necessary partner in biologic drugmaking. Biologic medicines rely on living materials. Repligen makes a substance called Protein A. The company also makes chromatography and filtration tools for bioprocessing.
Chief Executive Tony Hunt estimated in November 2018 that 80 medicines called monoclonal antibodies exist on the market. Most of them are purified on Repligen's Protein A product. Several hundred more are in development, he told Investor's Business Daily.
In late October, Repligen reported $69.4 million in third-quarter sales, up 40% year over year. On an organic basis, sales rose 28%. Adjusted earnings of 26 cents per share rose 44%. Both metrics have increased by at least a double-digit percentage for three straight quarters.
Shares have a strong Composite Rating of 98 and a perfect EPS Rating of 99. Shares also have a Relative Strength Rating of 93, putting Repligen stock's performance over the past 12 months in the top 7% of all stocks.
On MarketSmith.com's list of fastest-growing stocks, Repligen stock ranks No. 129. The company has a five-year adjusted earnings per share growth rate of 27%.
Repligen stock broke out of a cup-with-handle base on Jan. 2, topping a buy point at 93.60.
Edwards Lifesciences Pops In 2019
The health care stock makes systems to replace faulty heart valves. In August 2019, Edwards and rival Medtronic (MDT) gained Food and Drug Administration clearance to use their TAVR, or transcatheter aortic heart-valve replacements, in healthier patients.
Transcatheter aortic heart-valve replacement is a method of replacing a faulty heart valve without resorting to open-heart surgery. Now, the FDA is allowing some TAVR systems to be used in patients who are at a low risk of complications from surgery.
Over the course of 2019, Edwards stock jumped more than 52%. Shares have a best-possible Composite Rating of 99. The health care stock also has an RS Rating of 86, putting shares in the top 14% of all stocks in terms of 12-month performance.
With the exception of one quarter, Edwards earnings have risen by a double-digit percentage for several years. The same is true for quarterly sales growth. The health care stock has an EPS Rating of 97 out of a best-possible 99. The EPS Rating tracks a stock's recent profitability.
Edwards stock is currently forming a flat base with a buy point at 247.74.
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