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Want to Shrug Off Volatility? Buy 3 Medical Growth Stocks

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Wall Street returned to its see-sawing mode after commencing the year on a bright note. This attests to the fact that change is the only constant in the stock market. The moment we settle down with market trends and expect stability, something usually happens to shake us out of complacency. This time around, further rate hikes by the Fed, continued inflationary pressure, rising crude oil price and apprehensions regarding Chinese recovery are keeping Wall Street’s roller coaster going.  

However, every cloud has a silver lining and so does each market gyration. Although the unemployment rate increased sequentially 30 basis points in August to 3.8%, labor force participation was the highest since February 2020. Moreover, there was an uptick in employment in several sectors, including health care, leisure and hospitality, social assistance and construction. The healthcare sector has seen a steady recovery in hospital admissions and procedure volume that is driving the demand for drugs and medical devices.

Clearly, these factors speak positively about the Medical sector, and are likely to drive its performance in the rest of 2023. On that note, we picked some medical stocks that have gained more than 5% in the past three months, even amid market volatility.

Investing in the Sector is a Good Idea

Healthcare stocks like drug-makers, device-makers, service-providers and Mediclaim-providers comprise the Medical sector, which is currently ranked among the top 44% of the 16 Zacks sectors. The Medical sector is one of the defensive sectors and a good bet during high volatility as healthcare expenditure usually continues even during a downturn.

Further, with just a few weeks to go for another earnings season, we remain quite encouraged about the projections for the Medical sector. Markedly, the sector is anticipated to witness a year-over-year bottom-line decline of 11.5% on a 5.6% jump in revenues, per the latest Earnings Outlook. Notably, this fares much better than the previous quarter, wherein earnings declined 29% but revenues increased 5%.

That said, we picked three top-ranked Medical stocks that are likely to keep their robust show on. Backed by sound fundamentals and positive estimate revisions, these stocks are expected to be a valuable addition to your portfolio. Moreover, these stocks carry a favorable Growth Style Score, thereby doubling the expectations. Growth stocks have a solid earnings or revenue growth potential, which should lead to higher stock prices. Our research shows that stocks with a Growth Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy), provide the best returns.

3 Prominent Picks

California-based Molina Healthcare (MOH - Free Report) , with a splendid earnings surprise history, is a solid bet. Driven by its stellar past record, the company’s shares have risen 12.3% over the past three months, beating the industry’s 6.4% growth. With a Growth Score of B and a long-term earnings growth rate of 14.2%, we expect this multi-state managed care organization to reach greater heights. Notably, the Zacks Consensus Estimate for Molina Healthcare improved in the last 30 days. The company currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company provides managed healthcare services under the Medicaid and Medicare programs and through the state insurance marketplaces. Earlier this month, it acquired My Choice Wisconsin, which served more than 44,000 members. MOH is expected to complete the acquisition of Bright HealthCare’s Medicare businesses in California — Brand New Day and Central Health Plan of California — in the first quarter of 2024. This acquisition will add a premium revenue amount of $1.8 billion to MOH’s portfolio. The deal is likely to boost earnings by $1.00 per share.

You may also consider Dr. Reddy’s Laboratories (RDY - Free Report) , an integrated global pharmaceutical company engaged in providing affordable and innovative medicines. The stock has a Zacks Rank #2 and a Growth Score of A. Further, the Zacks Consensus Estimate for Dr. Reddy’s earnings for the current year has moved north from $3.74 per share to $3.79 in the past 30 days. Notably, the company’s shares were up 5% in the past three months compared with the industry’s 17.9% growth.

Dr. Reddy's has been witnessing healthy growth across its branded and global generic drug markets, especially in North America, EU and Emerging markets. Additionally, the company has a strong generic pipeline, with ANDA and drug master filings, which are expected to roll out in future quarters. RDY recently divested its non-core brands to focus on its core business, which is encouraging.

Investors can also bet on NeuroBo Pharmaceuticals , whose shares have rallied 7.6% in the past three months against the industry’s 6.2% decline. We remain optimistic about this biopharmaceutical company’s focus on novel treatments for neurodegenerative diseases. It has a Growth Score of A. Moreover, the Zacks Rank #2 company has witnessed a positive estimate revision for full-year 2023 over the past 30 days.

The company is progressing well with its lead pipeline candidate — DA-1241 — which is being evaluated for the treatment of nonalcoholic steatohepatitis (NASH). It initiated a phase II study evaluating DA-1241 in NASH patients earlier this month. A potential positive interim data, which is expected in the first half of 2024, will be a significant boost for NRBO.

See More Zacks Research for These Tickers

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Dr. Reddy's Laboratories Ltd (RDY) - free report >>

Molina Healthcare, Inc (MOH) - free report >>

NeuroBo Pharmaceuticals, Inc. (NRBO) - free report >>

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