Healthcare stocks haven’t quite outperformed the broader markets this year, per usual, but they have performed admirably given all of the political headwinds facing the sector as a whole. The sector’s resilience during this politically turbulent period stems from several favorable tailwinds, such as a bevy of deal-making, the advent of new therapies/diagnostics, and of course, the emergence of the legal medical marijuana space.
With this theme in mind, we asked three of our Motley Fool contributors which healthcare stocks they think are worth buying right now. They picked blue chip biotech Gilead Sciences (NASDAQ:GILD), cancer diagnostic specialist Guardant Health (NASDAQ:GH), and Canadian pot cultivator HEXO Corp. (NYSEMKT:HEXO). Here’s a brief rundown on why these three healthcare stocks might be worth adding to your portfolio soon.
Time to buy this former star
George Budwell (Gilead Sciences): Not too long ago, Gilead Sciences was a bona fide rock star within the biotech investing community, fueled by soaring sales of its single tablet regimen HIV medications and game-changing hepatitis C therapies. Concerns over new competitive threats in the HIV arena and plummeting hep C drug sales, however, changed the market’s tune toward this former top growth stock. In fact, Gilead’s stock has consistently been one of the biggest laggards within the biotech space — that is, until only a few months ago.
The biotech’s faltering top line, inability to bring any major new medicines — outside of HIV — to market in several years, and the rather questionable acquisition of Kite Pharma ultimately led to the departure of former CEO John Milligan. However, this managerial turnover has so far been a net positive for Gilead and its shareholders. Newly minted CEO Daniel O’Day has quickly put his stamp on the ailing biotech by hiring a separate CEO for Kite Pharma to accelerate the unit’s turnaround, and he recently cut a huge deal with Belgian biotech Galapagos NV to dramatically boost the company’s immunology pipeline.
The market, in turn, has cheered these moves by pushing Gilead’s shares up by nearly 7% this year. That’s a welcome change from the company’s never-ending downward trajectory over the prior three years. O’Day still has a lot of work to do to get the biotech back into tip top shape, but this Galapagos deal is an encouraging sign that he does indeed have a clear vision for how to accomplish this goal. As such, it might be time to finally catch this falling knife.
A leader in the next big thing
Keith Speights (Guardant Health): Everyone’s always looking for the next big thing. The reality, of course, is that there are usually multiple developments that could make an enormous impact. In healthcare, liquid biopsy is one of them, and Guardant Health is unquestionably a leader in this next big thing.
Liquid biopsy refers to detecting cancer through blood tests rather than using surgical procedures to obtain a biopsy for analysis. The trick with liquid biopsies is to find trace amounts of DNA that have broken off from tumor cells.