With the trend of the indexes and most stocks clearly down, we advise you to remain cautious, with plenty of cash and only small new buying if you're up for it, suggests Mike Cintolo, growth stock expert and editor of Cabot Top Ten Trader.
Happily, many stocks are still correcting normally, and these are the best candidates to lead the next sustained advance, whenever it begins.
It’s no surprise that many healthcare-related stocks have remained relatively resilient during this selloff, as the coronavirus could actually provide that sector some opportunities. And that includes eHealth (EHTH), which operates an insurance exchange that helps individuals find coverage tailored to their needs.
In fact, the company has the nation’s largest private online marketplace for Medicare insurance, and providing Medicare-related health plans is the company’s main growth driver (something that will only grow as the population ages).
It also has one of the nation’s largest selection of health insurance products, and independent research named it the most usable health exchange in the U.S., contributing to its growth story. eHealth posted the best annual enrollment period in the company’s history in 2019 and significantly exceeded its guidance across multiple metrics.
Continuing a long-term revenue growth trend, eHealth delivered a strong fourth quarter which boasted revenues 124% higher than a year ago and earnings up 140%.
The company also guided 2020 earnings well above expectations, and it anticipates that revenue will be 15% to 23% higher this year. Overall, eHealth has a solid business that should be insulated from today’s high-profile economic worries, which has kept buyers interested.
Volatility will remain extreme, but EHTH is worth watching. Aggressive investors could nibble here with a stop around the recent lows.
Teladoc (TDOC) is probably the #1 glamour stock in the entire market. As we’ve written before, the company is the hands-down leader in telehealth, with the only comprehensive virtual care offering (both outside and inside the hospital, and for a variety of conditions) out there.
Despite losses, the core business has been strong for a while, and this year there have been two catalysts boosting investor perception, the first being its buyout of InTouch, which is the market leader for in-hospital (provider-to-provider consultations) virtual care.
Mmanagement thinks it’s a $10 billion opportunity long term. The second, of course, is the virus, which many think will boost utilization rates in the near- and long-term.
Teladoc recently hosted an Investor Dayk, and while there was no major new projections, the top brass revealed some encouraging tidbits — it’s quite high on its new virtual primary care offering and sees rapid gains in mental health services (expected to grow more than 50% in 2020).
Management also thinks it can greatly expand its member base just from further penetrating existing clients and said it has 90% visibility into 2020 revenues at this point.
Overall, management sees sustainable 20% to 30% annual growth (and improving EBITDA margins) going forward, and that could prove conservative if the virus ratchets up utilization (paid visit revenue was only 19% of the firm’s total in Q4, but was up 47% from a year ago). It’s a big idea.
TDOC’s party really started when 2020 began, as the acquisition of InTouch set off a huge buying spree — the stock has been up every week this year.
We wouldn’t chase it here, but TDOC should at least be on your watch list, and a dip back toward its recent lows (as the moving averages catch up) could provide an opportunity to nibble.