If you heeded the old adage to "sell in May and go away" this year, you're probably second-guessing your decision now. The major indexes climbed during May -- and health-care stocks as a group performed even better. With share prices of so many companies near their 52-week highs, should the new saying be "sell in June before stocks swoon?" Maybe so, but there's no way to know when or if the market will pull back. Here are three health-care investment ideas for June for investors still looking to buy.
If you're looking for a big health-care company to add to your portfolio, look no further than Johnson & Johnson (NYSE:JNJ). J&J continues to experience strong growth with its pharmaceuticals, diagnostics, and medical device business segments. Its consumer products unit lags behind the other segments but still generates hefty profits.
The latest news from J&J isn't good, though. The company is recalling 32 million packages of its Cilest birth control pills in Europe, Asia and Latin America. Similar problems have plagued J&J over the last couple of years, with the company recalling blood glucose meters, contact lenses, heart devices, insulin pump cartridges, and over-the-counter drugs. These past recalls led megainvestor Warren Buffett to cut back on his holdings in the company. Buffett said that J&J has "a lot of wonderful products" and "a wonderful balance sheet" but that the company had made "too many mistakes."
However, I don't think the latest recall will weigh too heavily on the stock. Johnson & Johnson shares have slipped almost 5% from the highs hit in mid-May, but this minor pullback started 2 weeks ago before the recall was announced. The stock is still up nearly 19% year-to-date.
I think J&J's solid-if-not-spectacular growth prospects combined with a nice 3.1% dividend yield make the stock a good pick. As my Foolish colleague Brian Orelli said recently, "For long-term investors, there's rarely a bad time to buy Johnson & Johnson stock."
Buying shares in Sarepta Therapeutics (NASDAQ:SRPT) requires more boldness from investors than buying J&J stock, but I still think it's a smart idea over the long run. Sarepta is up 33% for the year, but shares have sank nearly 13% in the past few weeks.
You need to be bold to buy Sarepta because the stock could drift lower before it bounces back. Concerns abound about whether eteplirsen -- the company's drug that treats rare Duchenne muscular dystrophy, or DMD -- will gain accelerated approval from the Food and Drug Administration. If eteplirsen doesn't get an FDA nod for the accelerated track, Sarepta will need to move forward with a phase 3 trial for the drug.
Regardless of what happens in the near term, eteplirsen seems poised to be a game-changer for DMD patients. I think Sarepta shares will ultimately take off again in a major way. I'm not the only one who thinks this way. Billionaire George Soros upped his stake in Sarepta recently.
Something beaten down
While J&J and Sarepta have enjoyed success so far in 2013, that's not the case for Edwards Lifesciences (NYSE:EW). Shares of the medical device company are down 29% year-to-date. However, I suspect that this beaten-down stock remains a good investing option.
Edwards' shares plummeted in April after the company missed earnings estimates and lowered full-year guidance. This miss and more pessimistic outlook stemmed largely from sluggish U.S. sales of the company's Sapien heart valves. Edwards' CEO Michael Mussallem said that the lower sales were "primarily the result of evolving economics for some hospitals and still developing capacity of both hospitals and their heart teams." However, Mussallem added that the company's "estimate of the size of the U.S. transcatheter valve opportunity for the longer-term remains unchanged."
My view is that the prospects for Sapien are still strong. Edwards certainly encountered a big bump in the road during the first quarter, but the company didn't hit a dead end. Despite the disappointment, non-GAAP diluted earnings still jumped 35.8% year-over-year, and revenue grew by 8.2%. The recent stock drop makes Edwards' valuation more attractive for investors in my view.
Buy in June
I like the long-term prospects for J&J, Sarepta, and Edwards looks good. However, any of these three picks could take a hit if the overall market drops. All three companies also face unique challenges in the near-term that could hold shares back. With that in mind, here's a new adage: Buying these three investment ideas in June could make your portfolio balloon -- just maybe not soon.