A Trio of Healthcare Favorites

02/10/2014 8:00 am EST

Focus: STOCKS

Stephen Quickel

Editor, US Investment Report

Selecting new recommendations in a weakening market is a daunting task, to say the least, cautions Stephen Quickel, editor of US Investment Report.

Selecting new recommendations in a weakening market is a daunting task, to say the least. Our internal Watch List typically contains about 100 stocks we are considering as additions to the USIR Recommended List.

Until the recent institutional selling abates, and we have some strong up-days on heavy trading volume, we will not attempt to redeploy our idle cash. However, we are adding three healthcare-related stocks to our Watch List.

By far, the largest is McKesson Corp. (MCK), a San Francisco giant, with revenues nearing $130 billion, from medical supplies and medical technologies.

Analysts foresee five-year earnings growth of 19% a year, quite a feat for a company so large, progressing from $6.33 per share in 2013 to $8.54 this year, $9.84 next year, and $11.18 in 2016. Its PEG is a very attractive 0.88.

Questcor Pharmaceuticals (QCOR), which has done well for us before, fell in the second half of 2013, when other biotechs were soaring.

But now it has rebounded from 50 to the mid-60s on the prospect of 25-30% a year earnings growth. QCOR focuses on serious, hard to treat autoimmune and inflammatory diseases. Our target price is 85.

Emergent BioSolutions (EBS) is a far smaller specialist in bio-medical products for the military and commercial markets, including anthrax vaccine and decontamination agents. With revenues nearing $400 million, EBS is acquiring Canada's Cangene Corp. to expand its product line.

Of four analysts tracking the stock, two call it a strong buy and two call it a buy. Its PEG on 20% earnings growth is a 0.80. EBS is comfortably financed and should improve its profitability as it adds product lines and gets them to market.

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