Healthcare Companies That Made Investors Rich in 2012
Shas is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Reading my article's title, you might go - who cares? Who cares what stocks made people rich in 2012? Spending 20 minutes reading an article on history is not going to make my future golden, is it?
And you would be wrong…
As a matter of fact, some of the best and smartest investors out there put a lot of faith in the predictive nature of past history. So, if a certain set of stocks reaped high benefits for investors last year, we study those stocks to get an indication of why they did as well as they did. We are not simply focusing on those stocks per se. We are not saying - these stocks did good last year, so buy them this year. No, that is plain stupid and lazy investment strategy; what we are saying, however, is let’s find out why these stocks did well, which, in turn, will help us find other stocks this year that might do as well.
As an investor, your main aim is to multiply your wealth and while past performance is not a sure shot indicator of future returns, it does provide you with a basic groundwork to build upon. While picking stocks for your portfolio, it is advisable to analyze them on a sector basis. This approach lets you pick the best stocks from diverse industries and helps you diversify the risk profile of your portfolio. Another benefit of sector analysis is that it facilitates apples-to-apples comparison since all the different sectors have their specific macro environment. One of the most challenging sectors to analyze is pharmaceutical industry. Most of the companies have only a few or may be just one product to draw its major part of revenue from. Let’s have a look at the pharma companies which performed extremely well in the past 52 weeks and have solid fundamentals as well.
Regeneron Pharmaceuticals (NASDAQ: REGN): The stock not only generated 248% return in the past 52 weeks, but it also has healthy cash balance to help its future course of action. Regeneron Pharmaceuticals consistently increased throughout the year and it oscillated in the range of $50.27 and $188.95. The company started the year by settling a patent litigation with Genentech for US sales of EYLEA injection. Later in the year, it received FDA and EU approval for its colorectal cancer therapy Zeltrap. Regeneron Pharmaceuticals will collaborate with Bayer Healthcare to market this new treatment in various markets. Its stock trades at a P/E ratio of 93.59, which makes it more expensive than many of its peers, but given the strong potential for its therapies, Regeneron Pharmaceuticals is likely to perform well in the coming year as well and should be a strong contender for inclusion into your portfolio.
Gilead Sciences (NASDAQ: GILD): This $57.97 billion company provided 95.69 percent return in the last one year. Barring a sharp down movement in late February, the stock maintained its positive momentum throughout the year. The company approved 2 for 1 split, which will be effective from January 7 next year. Gilead Sciences stock mainly moved up on the expectations from its HIV therapy Stribild. Further, the company also has a strong drug candidate for Hepatitis C. These potential drugs will help Gilead Sciences in making up the shortfall caused by soon-to-be expired patents related to its superstar sellers. The stock is currently in strong bullish phase and created its new 52 weeks high of $77.12. Its lowest price point in the last one year stood at $36.98. Gilead Sciences is also looking to consolidate its position with acquisitions and merger. The company reported buying YM BioSciences. This acquisition will help the company gain a foothold in bone-marrow disorder therapy area. Gilead Sciences paid $510 million to acquire YM BioSciences, which is currently working on CY387, a therapy to treat myelofibrosis. The company has strong capital base, healthy drug pipeline and a leading position in AIDS/HIV market.
HCA (NYSE: HCA): The stock appreciated 59 percent in past 52 weeks. It trades at a very attractive P/E ratio of 4.66, which makes it one of the most cheaply priced healthcare stocks. HCA Holdings boasts of a solid market cap of $14.53 billion and 53 percent of its stock is held by institutional investors. The company announced its plan to make a secondary offering, under which two of its private equity partners Kohlberg Kravis Roberts and Bain Capital will sell 32 million shares. While the market has reacted negatively to the news, analysts are considering the news to be positive. HCA Holdings is improving its operations and last month reported $360 million worth of quarterly profit. Its revenue also increased 11 percent. Apart from capital appreciation, you can also look forward to receiving good periodic returns in the form of dividends. Recently, it announced special dividend of $2 per share. HCA Holdings also paid dividend in October and February. While there is still some uncertainty about the impact of new healthcare regulations on the fortunes of the company, the effect is likely to be largely positive. The stock has been snapped up by noted investor John Paulson as it constituted one of his biggest stock purchases for the period ended on June 30.
While picking a stock on the basis of its past stock market performance, it is imperative to find the cause and effect relationship. If you ignore this rule, you may end up buying low quality operator driven stocks. The above stocks share some common factors such as robust financial health and strong outlook. That tells me these are not hyped up stocks that will go down without reason.
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