There is no doubt change is in the air across the U.S. after our recent historic election. And one of the likely first changes — or, at least, one of the first to be discussed — will be how to modify, dismantle or eliminate the Affordable Care Act, commonly referred to as “Obamacare.”
The ACA was an unwieldy monster when it was first passed and hasn’t become any less cumbersome. The Republican Congress fought it tooth and nail all the way to the Supreme Court.
And now, with control of the presidency and both houses of Congress, it looks like change is upon us.
This spells risk and opportunity for healthcare companies. So I combed my databases to find the stocks with the most upside potential in this new world of healthcare.
A-Rated Healthcare Stocks to Buy: PharmAthene (PIP)
Market Cap: $200 million
PharmAthene, Inc. (NYSEMKT:PIP) is a biotech with a unique niche in the infectious disease market. That alone will keep it pointed in the right direction as Obamacare gets a makeover.
Its main client is the U.S. Federal Government, which means it is locked in for long-term contracts that won’t be shut down anytime soon.
PIP is a small company, with a sub-$200 million market cap, so it doesn’t take a lot to keep it afloat. It’s a specialized firm that focuses on one specific niche: biodefense. Essentially, it makes anthrax vaccines for the U.S. military, the civilian population and some non-U.S. markets.
Regardless of what happens with the ACA, PIP will have plenty of work. And if the world becomes more volatile, its role will be even more important.
In the past month, the stock is up nearly 10%. In the past six months, almost 35%; and in the past 12 months, it has risen 80%-plus. Its recent court win and judgement against SIGA Technologies also allows for a brighter path forward.
A-Rated Healthcare Stocks to Buy: Xencor (XNCR)
Market Cap: $1.1 billion
Xencor Inc (NASDAQ:XNCR) is a clinical stage biotech specializing in using antibodies to fight diseases ranging from autoimmune disorders to cancer.
Basically, “clinical stage” means that the company currently has its drugs in various phases of the Food and Drug Administration’s approval process. But its technology has already sparked interest with major pharmaceutical companies that are pairing up with XNCR to complement their drugs.
XNCR specifically targets one piece of the antibody structure to enhance its natural function and performance. That means lower doses of drugs that your body can work with to help fight whatever disease you are talking about.
Working with your body to combat chronic or fatal diseases is the next step in biotech. And it looks like XNCR is becoming very popular. The stock is up 90%-plus in the past 12 months, and its drugs aren’t even on the market yet. If things continue to go well in the lab, XNCR is also a prime takeover play.
A-Rated Healthcare Stocks to Buy: Ariad (ARIA)
Market Cap: $2.8 billion
Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA) specializes in small molecule cancer drugs. It already has one drug, Iclusig, that is approved for use in the U.S., European Union, Canada, Australia and Israel.
Iclusig is approved to treat two specific kinds of leukemia. ARIA also has a new drug in the pipeline that is showing powerful results for treating non-small cell lung cancer. In September, an investment house — Leerink — began coverage of ARIA with an “outperform” rating, putting a $20 stock price on it in coming months.
The stock is currently trading around $13. The new coverage has sent the stock up 32% in the past three months and it’s up 120% year-to-date.
Leerink believes that the ARIA’s Iclusig and its pipeline drugs have enough potential to push the stock up to 35% annual growth through 2020. At just under a $3 billion market cap, it also could be a takeover stock that goes for a very big premium. Either way, ARIA wins.
A-Rated Healthcare Stocks to Buy: Exelixis (EXEL)
Market Cap: $4.8 billion
Cabometyx is for the treatment of kidney cancer and was launched in the second quarter of this year. The response has been very positive, with Cabometyx generating $17.6 million in net product revenue in Q2 and $31.2 million in Q3, the first full quarter of sales. As a result, total sales for Exelixis’ third quarter increased 35% sequentially.
Recent data also shows that Cabometyx is outperforming Pfizer Inc.‘s (NYSE:PFE) Sutent, which is a very good sign for EXEL’s pipeline. And its market share is up from 20% to 35% in just one quarter.
The stock has taken off on the positive news, it’s up 215% in the past six months. That kind of run makes sense, since no one on the Street is going to take a chance on a small biotech until it can show its value. EXEL has made that transition now and has plenty of upside left.
A-Rated Healthcare Stocks to Buy: WellCare (WCG)
Market Cap: $5.7 billion
Industry: Managed Healthcare
WellCare Health Plans, Inc. (NYSE:WCG) is a healthcare firm that has built its business off expertise in three major areas of government-sponsored health care: Medicaid, Medicare Advantage and Medicare Prescription Drug Plans.
Now, you might be thinking that if Obamacare is dismantled, WCG and companies like it will be in deep trouble. But it is highly unlikely that President-elect Donald Trump or the Congress will gut Medicare and Medicaid. That is not the reform that Trump ran on, and it’s the third rail of politics that few dare to touch.
Plus, most Americans, especially older Americans, depend on government-sponsored healthcare regardless of how inside-the-Beltway types feel about it.
WCG is up a very respectable 64% in 2016, and the election of Donald Trump didn’t hamper its rise. This is going to be a winner as a Trump administration moves forward, since competition in the market will likely thin out.
A-Rated Healthcare Stocks to Buy: Heska (HSKA)
Market Cap: $481.6 million
Industry: Veterinary Medical Equipment
Heska Corp (NASDAQ:HSKA) specializes in medical equipment, tools and drugs for the veterinary community.
This is becoming a growing business. A slow economy may mean limiting spending on some purchases, but pets usually fare pretty well during periods of slow growth. They are generally an extravagance, since a large majority of animals are kept for comfort rather than work.
Also, insurance for pets has become more common, which means visits to the vet aren’t as expensive as they used to be. All this works to HSKA’s favor.
But you won’t see much sign of HSKA products because they are the blood analyzers and testing equipment that are used in the vet labs for monitoring your pet. There is also a significant market for commercial and large breed animals as well, since testing can help keep animals healthier.
The third quarter was a record for Heska, with revenues up 19% from the same quarter last year. Net income was up 136%. In the past six months the stock wafted up 80%-plus as HSKA starts to realize efficiencies of its new size.
A-Rated Healthcare Stocks to Buy: CRH Medical (CRHM)
Market Cap: $245.8 million
Industry: Medical Equipment
CRH Medical Corp (NYSEARCA:CRHM) is a play on the graying of the baby boomer generation.
A majority of its services are to aid in the use of colonoscopies and hemorrhoid management. Certainly not a sexy niche, but one that is growing. Hey, somebody has to do it, and CRHM is doing a bang-up job.
On the colonoscopy side, CRHM manages outpatient anesthesia for these as well as most endoscopic procedures. An estimated 25 million anesthetics are administered each year, and dedicated anesthesia providers were a growing sector of the medical industry.
Hemorrhoids are certainly not the most discussed malady people share, but it is increasingly common among the over-50 set. According to CRHM, more than 50% of people will suffer from hemorrhoids before they are 50 and that number increases as they age. CRHM has a treatment that removes hemorrhoids.
The stock is up 100%-plus in the past six months and it is well on its way to another double in coming quarters. It has a $245 million market cap, so it will be volatile for now; but if your heart can take it, it’s well worth a look.
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.