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3 Rock-Solid Healthcare Stocks to Buy in a Market Crash

By Adria Cimino – Updated Jul 28, 2020 at 1:13PM

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These companies have proven they can rebound from the worst.

During a market crash, it can be common for investors to worry that the stocks they're buying at a dirt-cheap price might not rebound -- that they might experience extended declines and never recover. That's the worst-case scenario, of course. In most cases, if we invest in companies with profit and revenue growth, it's likely their shares will bounce back.

So let's talk about two healthcare stocks that have already done just that, and another that's on the way. Even considering their gains since the March crash, these rock-solid companies are still worth adding to your portfolio today.

An investor holds blocks marked 2020 with an arrow pointing downward.

Image source: Getty Images.

Illumina

One of the biggest reasons to like Illumina (ILMN -1.61%): It's the leader in the genome sequencing market. It holds a more than 70% share, according to Morningstar. The global DNA sequencing market, at a compounded annual growth rate of 19%, is expected to reach $25 billion by 2025, according to Allied Market Research. Another positive point: Illumina specializes in "short reads" of genetic material, considered more accurate than the "long-read" technique.

The coronavirus outbreak weighed on Illumina in the first quarter. Customers postponed genetic testing and the ordering of new systems, for example. The company noted that it expects the second quarter to be "extremely challenging." This might hurt shares in the short term, but this slowdown doesn't change my long-term optimism regarding Illumina. The company's annual revenue has climbed for 15 years, and in 2018, it crossed the $3 billion mark. Since 2014, earnings have climbed every year except one, when they remained stable. And earnings surpassed analysts' average estimates in the past four quarters.

There is always the possibility of a new technology dethroning Illumina. But barriers to entry are high, which means any upset to the company's market share won't happen overnight. Illumina shares have erased their market-crash losses and are now up 15% this year. Considering the company's market share and earnings track record, I would expect the shares to rebound in future times of trouble as well.

Bristol Myers Squibb

With the acquisition of Celgene last fall, Bristol Myers Squibb (BMY -0.81%) obtained multiple myeloma blockbusters Revlimid and Pomalyst. The drugs' revenue climbed 13% to $2.9 billion and 28% to $713 million, respectively, in the first quarter from the year-earlier period. Bristol Myers Squibb already had five blockbusters prior to the Celgene purchase. And not counting the Celgene drugs, four of Bristol Myers Squibb's drugs posted revenue growth as high as 37% in the first quarter.

The coronavirus outbreak might continue to weigh on business, because the crisis isn't over. But Bristol Myers Squibb's solid portfolio and full pipeline should assure a rebound. The company has more than 50 compounds in development, and there's plenty of potential for growth on the horizon. An example is cancer drug Opdivo, which generated $1.8 billion in revenue in the first quarter. The U.S. Food and Drug Administration (FDA) recently approved Opdivo and the company's Yervoy as a combination treatment for certain forms of lung cancer -- the drug's sixth indication. And in June, Bristol Myers Squibb launched Zeposia, its newly approved oral medication for relapsing forms of multiple sclerosis.

Bristol Myers Squibb's share price has rebounded 25% since the market crash, paring its decline to 10% for the year. Wall Street expects shares to climb by 23% in the next 12 months. That seems reasonable, considering the growth gained from the Celgene acquisition.

Abbott Labs

Abbott Laboratories' (ABT -0.39%) annual revenue has been climbing for the past three years, and earnings have been rising for the past two. Abbott has made headlines in recent months with its COVID-19 detection tests. The company's molecular diagnostics business posted a 234% gain in sales in the most recent quarter thanks to COVID-19 testing. But that wasn't enough to make up for business lost in other areas due to the focus on COVID-19 at hospitals and in labs. Abbott reported an 8.2% drop in global revenue.

Once the coronavirus crisis passes, COVID-19 testing might remain in demand. And even better, the rest of the company's revenue will likely return to normal levels as patients return to labs for other tests and orders for medical devices resume. In the quarter prior to the health crisis, revenue climbed 7.1%, with the nutrition, diagnostics, established pharmaceuticals, and medical devices segments all posting growth.

Another bright spot: The FDA recently cleared Abbott's FreeStyle Libre 2 glucose monitoring system. The previous version has been a big sales driver, with revenue climbing 37% in the most recent quarter.

Abbott's shares have rebounded 58% from their lowest point in March and are now up 14% for the year. As with Illumina and Bristol Myers Squibb, Abbott faces a temporary slowdown due to a very specific situation. A future market crash that's not linked to a health crisis would likely have much less of an effect on business at this healthcare company. That's why I would scoop up shares of Abbott in a market crash and hold on for the long term.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bristol Myers Squibb and Illumina. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Bristol Myers Squibb Company Stock Quote
Bristol Myers Squibb Company
BMY
$70.71 (-0.81%) $0.58
Abbott Laboratories Stock Quote
Abbott Laboratories
ABT
$100.68 (-0.39%) $0.39
Illumina, Inc. Stock Quote
Illumina, Inc.
ILMN
$190.38 (-1.61%) $-3.11

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