The strong U.S. dollar is crushing the sales and earnings of big multi-international stocks that dominate the S&P 500. As a result, there is a massive parade out of multi-international companies into more domestic, small- and mid-cap stocks.
There’s no denying it; we are now in the midst of a small- to mid-cap resurgence. The last time we had a “seismic shift” out of large-cap and mega-cap stocks was way back in 2000 when the S&P 500 became too top heavy. At that time, mega-cap stocks flamed out and the tail end of the S&P 500 did much better, leading the overall stock market for the next seven years.
This time around, multi-international stocks are faltering in the wake of the strong U.S. dollar, and they are passing the baton to small- and mid-cap domestic stocks.
So, I expect March to be the “calm before the storm.” Once first-quarter earnings season starts in April, the flight out of multi-international companies will accelerate.
What’s great is that the money is not leaving the stock market.
With yields collapsing abroad, and with the Federal Reserve staying the course at home, there is nowhere else to go. So, money is migrating to better opportunities or chasing dividend yields.
Healthcare, health insurance and pharma stocks are the best stocks to put your money in this month. Let’s take a look at three health-related stocks that you should add:
Best Stocks to Keep Your Portfolio Healthy: Mallinckrodt PLC (NYSE:MNK)
I’d like to add Mallinckrodt PLC (NYSE:MNK). Mallinckrodt Plc develops and sells branded and generic specialty pharmaceuticals, active pharmaceutical ingredients (API) and isotopes that are used in medical imagining equipment.
While Mallinckrodt Plc has a commercial presence in 65 countries, the U.S. is its largest market. Last year, the U.S. accounted for over 92% of its Specialty Pharmaceutical sales and 47% of its Global Medical Imaging sales.
So, Mallinckrodt actually benefits from the stronger dollar, a claim few multinational companies can make.
Mallinckrodt is also in the middle of a growth spurt, having recently bought Questcor Pharmaceuticals Inc for $5.8 billion and Cadence Pharmaceuticals, Inc. for $1.4 billion. Already these new acquisitions are boosting sales and earnings.
Last quarter, Mallinckrodt reported sales of $866.3 million and earnings of $1.84 per share, translating to 60.4% annual sales growth and a whopping 109% adjusted earnings growth. Analysts were predicting just $1.57 per share — so, Mallinckrodt posted a 17.2% earnings surprise.
For the current quarter, the analyst community is estimating 53.9% annual sales growth and 62.1% annual earnings growth. Mallinckrodt has also recently authorized a new $300 million share repurchase program. I consider MNK a Moderately Aggressive stock and a “strong buy.”
Best Stocks to Keep Your Portfolio Healthy: Anthem Inc (NYSE:ANTM)
Anthem Inc (NYSE:ANTM) provides medical insurance products to nearly 69 million customers. In fact, one in nine Americans receives coverage for their medical care through Anthem’s plans.
In addition to traditional PPO, HMO and hybrid health insurance plans, Anthem offers dental, vision, life and disability insurance benefits. Anthem provides its services to individuals, public and private employers, as well as Medicaid and senior markets.
ANTM was previously known as WellPoint Inc. but changed its name to Anthem Inc last December. Yield-seekers may like to know that ANTM has a 1.8% annual dividend yield.
Now, Anthem has been in the news lately after a data breach compromised customers’ personal information. Anthem has responded by offering free identity theft protection for two years to all of its customers. Despite the near-term embarrassment and added costs associated this breach, Anthem is still looking great for the long haul.
In the most recent quarter, ANTM stock’s revenues rose 6.1% year over year to $19 billion. Over the same period, Anthem’s earnings skyrocketed 267% to $506.7 million, or $1.80 per share. Anthem’s operating earnings were $1.73 per share.
The analyst community was expecting revenues of $19 billion and operating earnings of $1.72 per share. So, Anthem matched the consensus sales estimate and beat the EPS estimate.
Looking ahead, Anthem’s prospects are even stronger because there is now a 2% tax on household income for U.S. citizens that do not have healthcare coverage. So, ANTM is expected to continue to have strong enrollment in the first quarter.
Analysts expect 10% sales growth and 16.1% earnings growth over last year. Better yet, in the past month, the consensus EPS estimate for this quarter has jumped nearly 8% to $2.67 per share. Typically, positive analyst earnings revisions precede future earnings surprises. Anthem is a good stock to buy.
Best Stocks to Keep Your Portfolio Healthy: UnitedHealth Group Inc. (NYSE:UNH)
UnitedHealth Group Inc. (NYSE:UNH) is another heavy hitter in the healthcare sector, being the largest single health carrier in the U.S.
UNH serves more than 85 million people worldwide and is a parent company to six businesses, including UnitedHealthcare. UnitedHealth Group’s other main branch, Optum, administers everything from mental health and substance-abuse programs to mail-order pharmaceuticals.
UNH is a healthy company in more ways than one. UnitedHealth Group’s cash flow and return on equity are top-notch, and it has a strong history of earnings surprises and analyst revisions.
UNH stock’s recent fourth-quarter report was quite strong. UnitedHealth Group’s revenue rose 7.4% year over year to $33.43 billion, and its earnings rose 9.9% to $1.51 billion or $1.55 per share.
The analyst community was expecting revenue of $33.1 billion and earnings of $1.50 per share. So, UNH posted a 1% revenue surprise and a 3.3% earnings surprise.
I expect this trend to continue; UnitedHealth Group is also benefitting from the same ObamaCare trend that Anthem is. So, for the current quarter the analyst community is estimating 8.9% annual revenue growth and 21.8% annual earnings growth. The consensus earnings estimate has risen 8% to $1.34 in the past three months. UnitedHealth will likely do even better.
UNH also has a 1.4% annual dividend yield. Between its solid dividend and earnings potential, I recommend you buy UnitedHealth Group.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.