Many investing strategies can secure your financial future. The three keys are to invest as much as you can as often as possible, pick businesses with products/services that customers demand, and have the patience needed to grow rich.
Whether as a consumer or an investor, everybody likes a good bargain. The strategy that revolves around buying stocks for less than what they are worth is called value investing. This approach to investing can limit downside risk and maximize capital appreciation when done right. Here are two large-cap stocks that Wall Street believes could be heading for a rebound in the year ahead.
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1. Centene: Medicaid expansion is a growth driver
Serving over 27 million members in the U.S. with various health plans like Medicaid, Medicare, Marketplace, and Tricare (i.e., insurance for military members and their families), Centene (CNC 2.13%) is a well-established managed care company. In fact, the company's 16 million Medicaid members make it the largest Medicaid-focused managed care company in the country.
NYSE: CNC
Key Data Points
Medicaid-enrollment growth is showing no signs of slowing down anytime soon. It's expected that total enrollment in the program will grow from 78.5 million in 2022 to 82 million by 2027. It isn't hard to imagine a future in which Centene continues to thrive as the leader within this huge market. That is why analysts believe that the company's non-GAAP (adjusted) diluted earnings per share (EPS) will rise by 10.6% annually over the next five years. This is almost in line with the healthcare plans' industry-average earnings-growth outlook of 12.7%.
Surprisingly, the market has been down on the stock over the past 12 months. Shares of the health insurer have dropped more than 20% during that time. This poor recent performance has pushed the forward price-to-earnings (P/E) ratio down to just 9.4, which is far below the healthcare plans' industry-average forward P/E ratio of 14.
Thanks to Centene's healthy fundamentals, analysts expect the stock to come roaring back in the next 12 months: The average analyst price target of $89 would represent a blistering 33% upside from the current $67 share price. This significant potential near-term upside, coupled with bright long-term prospects should intrigue value investors.
2. Viatris: New drug launches should be a positive
Most people probably aren't familiar with the generic and branded medicines company Viatris (VTRS +4.78%). But they may recognize the medicines sold by Viatris, such as Viagra, Lipitor, Lyrica, and Zoloft.
NASDAQ: VTRS
Key Data Points
As it stands, Viatris is currently in the turnaround phase of its business. That is because many of the drugs in its portfolio have experienced patent expirations and are facing intense competition. But Viatris has anticipated these developments for countless years and invested in research and development to eventually help its business rebound. Viatris has several potential blockbuster drug candidates (i.e., peak sales potential of $1 billion or more) that it forecasts will launch by 2028. These include a generic for the hit multiple sclerosis drug dubbed Copaxone and a biosimilar for Botox.
Due to this solid pipeline of products that could be launched soon, analysts are projecting 4.3% annual earnings growth between now and 2026. The stock's 4.8% dividend yield is nearly threefold higher than the S&P 500 index's 1.7% yield. This generous payout is well covered, with the company predicting a free cash flow of around $2.5 billion in 2023. For context, dividend payments weren't quite $600 million in 2022.
Value investors can scoop up shares of Viatris at a forward P/E ratio of just 3.4 -- a fraction of the specialty and generic-drug manufacturers industry average-forward P/E ratio of 18.9. Such a low valuation arguably prices in the risks of an elevated debt load in a high interest-rate environment. That's why analysts have an average 12-month price target of nearly $14, a 39% upside from the current $10 share price.
