Investors have been abandoning healthcare stocks this year, a significant shift from last year when they were considered a safe haven during uncertain times. The fear of a recession has subsided, and rising interest rates have diminished the appeal of the steady dividends offered by big pharmaceutical companies.
The Health Care Select Sector SPDR Fund (XLV), an exchange-traded fund that closely tracks the healthcare sector, has declined by 3% year-to-date, while the broader S&P 500 has surged by 18%. Additionally, the S&P 500 Pharmaceuticals industry index has experienced a notable decline of 5.7%.
There are valid concerns for companies in the healthcare sector. The Federal Trade Commission has become increasingly assertive in challenging healthcare mergers, which could disrupt established business models. Furthermore, pharmaceutical companies are apprehensive about Medicare’s newfound ability to negotiate drug prices, as it could potentially impact the industry negatively.
Nonetheless, despite these challenges across the healthcare sector, there are still opportunities for astute stock-pickers. In order to identify potential gains, we have screened the healthcare companies in the S&P 500 that have been most impacted by the prevailing investor sentiment. Our analysis focused on companies with share price declines exceeding 20% over the past 12 months. Among these, we have identified and highlighted five companies with significant growth potential based on average price targets as provided by analysts tracked by FactSet.
The stocks that passed our screening process include Moderna (MRNA), a prominent Covid-19 vaccine manufacturer; Organon (OGN), a company specializing in women’s health; Pfizer (PFE), a pharmaceutical titan; Incyte (INCY), a biopharmaceutical firm; and Bio-Rad Laboratories (BIO), renowned for producing instruments and tools utilized in scientific research and medical testing.
