Put on your helmets! It's time to bring in the defense.
The National Bureau of Economic Research disseminated the glum news on Monday that investors knew in the back of their minds: The U.S. is in a recession and has been since payrolls peaked in December of 2007.
It's late in the game. We're in the fourth quarter, your portfolio is down, the clock is ticking and Mr. Market is playing hardball. No doubt you've tried to remain on the offense, but now the game rules have shifted to defense. The health-care sector is full of defensive plays, as many of these companies operate in recession-resistant industries. Just because the economy has fallen off a cliff, doesn't mean people are going to ignore their health problems.
Companies like Amgen
Another example is biopharmaceutical company Emergent BioSolutions
To find winning companies, I used the Fool's CAPS screening tool, looking for companies that:
- Operate in the health-care sector
- Have posted a revenue growth rate of 5% or better for the past three years
- Have a return on equity of 17% or greater to ensure efficiency
- Have market caps of $500 million or greater
- Have a current ratio of one or greater, to ensure liquidity
- Were rated "outperform" by at least one analyst on Wall Street
- Have CAPS ratings of four or five stars, the highest two from our CAPS community
In the first 20 months since we began our CAPS investment community, four- and five-star companies outperformed the market, with average annualized gains of 7% and 12%, respectively.
Company Name |
Market Capitalization |
Rev. Growth Rate (last 3 Years) |
Return on Equity (TTM) |
Current Ratio (mrq) |
---|---|---|---|---|
Amgen |
$60.9 billion |
6.4% |
20.5% |
3.2 |
China Medical Technologies |
$513 million |
61% |
23.5% |
2.6 |
Emergent BioSolutions |
$707 million |
20.6% |
24.4% |
2.9 |
Gilead Sciences |
$42.0 billion |
34.1% |
44.3% |
3.4 |
Intuitive Surgical |
$5.2 billion |
51.3% |
17.1% |
4.4 |
Johnson & Johnson |
$159.0 billion |
8.1% |
27.6% |
1.6 |
Meridian Biosciences |
$940.6 million |
14.4% |
23.5% |
6.2 |
Mindray Medical International |
$2.0 billion |
44.4% |
21.7% |
2.2 |
Novartis |
$107.8 billion |
8% |
23.9% |
1.6 |
Source: Motley Fool CAPS. TTM = trailing 12 months; mrq = most recent quarter.
This is only a starting place. Prospective investors should pay careful attention to companies' respective businesses, position in the competitive landscape, and financial health. Also, be mindful of valuation, as many investors on Wall Street are aware of the promise that companies in the health-care sector hold in this environment.
Start padding your portfolio at Motley Fool CAPS today! Let the collective wisdom of our 120,000 member-strong investment community help you make better investing decisions.
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