The recent market downturn has created some great buying opportunity for opportunistic healthcare investors. But which stocks can be safely purchased today? We asked a team of healthcare investors to weigh in, and they picked AbbVie (NYSE:ABBV), Mylan Laboratories (NASDAQ:MYL), IQVIA Holdings (NYSE:IQV).
Everybody can love this stock
Keith Speights (AbbVie): Some stocks don't appeal to every kind of investor. In fact, it's unusual to find a stock that does have such an appeal. However, I think AbbVie does. It's a stock everybody can love.
Let's start with growth. Over the past three years, AbbVie has generated the highest total shareholder return and the highest adjusted earnings-per-share growth of any big pharma stock. The drugmaker should be able to keep its impressive momentum going.
Humira is on track to continue its reign as the world's top-selling drug for years to come. Sales for cancer drug Imbruvica are soaring. Hepatitis C drug Mavyret should become AbbVie's next blockbuster. And the company has a pipeline chock-full of potential big winners. Wall Street expects AbbVie to grow earnings by 17% annually over the next five years.
What about valuation? Even after gaining more than 80% over the last 12 months, AbbVie stock still trades at only 13 times expected earnings. Factoring growth potential in makes the stock's valuation look even more attractive for value investors.
Of course, income investors are more interested in juicy dividends. AbbVie's got that base covered, too. The company's dividend currently yields 2.44%. AbbVie has increased its dividend payout by nearly 78% since being spun off from Abbott Labs (NYSE:ABT) in 2013.
Whatever your style of investing, AbbVie has something to offer. And with several new product launches and pipeline updates on the way, February is a great time to buy this pharma stock.
A key player in the fight to keep healthcare costs down
Chuck Saletta (Mylan Laboratories): Generic-drug maker Mylan Laboratories is a recognized leader when it comes to keeping a lid on escalating healthcare costs. A generic pharmaceutical manufacturer tracing its history back to the 1960s, Mylan Laboratories has long played a role in driving down the costs of medicines that have lost their patent protections.
What makes Mylan Laboratories look like a strong potential investment right now, though, is the fact that its shares are priced at a bargain compared to its potential. Its shares currently fetch less than eight times its forward earnings, and those earnings are anticipated to grow by better than 4% annualized over the next five years. While that's not exactly a rapid growth trajectory, it is positive expectations, making that forward price-to-earnings ratio a bargain price for a solid business.
Backing up that earnings potential is a solid balance sheet. Mylan Laboratories currently sports a bit more than $760 million in cash, a debt-to-equity ratio just slightly above 1, and a current ratio above 1.4. That balance-sheet strength gives Mylan the ability to ride out ups and downs in the economy without major worry regarding being able to roll its debts as they mature.
It's not often that you can buy shares of a well-capitalized, leading and growing business for less than 10 times its expected earnings, but right now, with Mylan Laboratories, you can.
Pharma's go-to partner
Brian Feroldi (IQVIA Holdings): Developing a new drug from scratch is a long and grueling process fraught with risk. What's more, even if you cross the finish line, there's no guarantee that healthcare providers, insurers, or patients will even use your product.
With millions (or billions) on the line, most drug developers are willing to do anything they can to give their compound the best shot at success. That's why many of them choose to partner up with IQVIA Holdings.
IQVIA -- formerly known as Quintiles IMS -- is the world's largest clinical research organization. Drug developers can hire IQVIA to run their clinical trials, gather the lab work, and analyze the data. This is a process that IQVIA understands inside and out, which is why so many companies are willing to partner with it. For evidence of its popularity, consider that the company's backlog of projects stood at $10.3 billion as of the end of September.
Better yet, if a drug does makes it to market, IQVIA can also help with the commercialization process. IQVIA boasts a huge database of patient records and prescriptions that can be accessed for a fee. Most pharmaceutical companies are happy to pay up for access because it enables their sales team to reach maximum efficiency.
When combined, these two businesses enable IQVIA to make money from all facets of the drug development process. With its shares currently trading hands for around 18 times 2018 earnings estimates, right now is a great time to get in.