14 Healthcare Stocks Fundstrat Is Buying

• Fundstrat believes that traders should be buying the dip in Healthcare stocks.
• The firm sees a compelling risk/reward balance in several quality Healthcare stocks.
• History shows that buying Groups that have fallen 20 percent or more in a month typically generates strong returns.

In a new report, Fundstrat analyst Thomas Lee looks for buying opportunities in the beaten-down Healthcare sector. Lee believes the selloff has dragged down some quality stocks to prices low enough for traders to pull the trigger.

What happened?
Healthcare stocks have plunged in recent weeks on fears of a political backlash against drug price increases. However, Lee believes that this sell-off has created a favorable risk/reward balance for many leading names in the space.

Value
According to the report, the Healthcare sector has accounted for 21 percent of revenue increases since 2009 but only accounted for 15 percent of the overall increase in market cap. In addition, since 1973, Groups that have collectively fallen 20 percent in a month have risen by between 18 and 28 percent over the next year about two-thirds of the time.

Stock picks
Lee’s top stock picks are mostly value picks. “Assuming risk premia has risen for the group, investors are going to favor EPS growth with a potential P/E/ kicker—hence, we favor lower P/E stocks,” he explains.

The report names the following stocks as top Fundstrat picks:
Express Scripts Holding Company ESRX
Aetna Inc AET
Henry Schein, Inc. HSIC
Baxter International Inc BAX
Laboratory Corp. of America Holdings LH
Anthem Inc (NYSE; ANTM)
Mylan NV MYL
AmerisourceBergen Corp. ABC
PerkinElmer, Inc. PKI
Varian Medical Systems, Inc. VAR
DENTSPLY International Inc. XRAY
Waters Corporation WAT
Quest Diagnostics Inc DGX
MannKind Corporation MNKD

Disclosure: the author holds no positions in the stocks mentioned.