Rep. Steve Scalise meant business when he had said, “We are not giving up on repealing and replacing Obamacare.” Following a series of futile attempts by the GOP to dismantle the Affordable Care Act, the Republicans have pledged another solid shot at abolishing the program.
Notably, the fate of Obamacare will be decided on September 30. No matter what the future holds, the day will provide investors a clear picture of where the MedTech industry is headed.
The Graham-Cassidy Bill
This ‘last-ditch’ Republican effort to end Obamacare has been led by Senators Lindsey Graham, Bill Cassidy, Dean Heller, Ron Johnson and former U.S. Senator Rick Santorum, who unveiled a new legislation to reform health care last week.
The new legislation, which is commonly referred to as the Graham-Cassidy-Heller-Johnson (“GCHJ”) bill or the Graham-Cassidy bill, proposes the replacement of Obamacare with a block grant that will be given to states every year to help individuals pay for health care.
The bill will allow states to decide how the funds will be used for health care needs of their citizens. States will also get more flexibility as well as resources to create healthcare systems with lower premiums and expanded coverage.
Why Value Investing?
As the MedTech space has been facing increased volatility as of late, we believe adopting an inherently defensive investment strategy would be apt. The goal is to focus on stocks that are trading at enticing discounts, and those that have a market value lower than their intrinsic value. Such stocks may not make it to the list of bigwigs. However, at this point in time when the economy might look up again, it seems prudent to invest in stocks that are currently trading cheap.
After the final decision on the latest Obamacare replacement bill is announced, the market might get into a bullish run. In light of this, value stocks are expected to hold enough potential to rake in more returns, unlike expensive growth stocks.
Go Easy on the Pocket: 5 Stocks
Given the current volatile healthcare environment, we have picked five companies that are great value bargains and are poised for stellar gains. Zacks has designed the unique Style Score System to compare each parameter of a stock with its peer group to analyze whether the stock is attractive from a value perspective.
Notably, these stocks sport a Zacks Rank #1 (Strong Buy) or #2 (Buy), with a VGM Score of A or B. The VGM Score (V stands for Value, G for Growth, and M for Momentum) essentially highlights the critical factors that might drive the stock’s price in the near term.
Smith & Nephew Plc (SNN - Free Report) : Smith & Nephew carries a Zacks Rank #2, VGM Score of B and Value Style Score of B. Coming to price performance, the company represented a return of 10.5%, much higher than the broader industry’s increase of roughly 9.5%. The company designs, develops, and sells medical devices worldwide.
Smith & Nephew’s knee franchises delivered solid results in the last quarter led by strong contributions from the company’s flagship JOURNEY II platform. Furthermore, the company’s Sports Med Joint Repair segment posted solid performance on the back of the recent launches: Q-FIX for shoulder and ULTRABUTTON for knee repair.
Masimo Corporation (MASI - Free Report) : Masimo carries a Zacks Rank #2, VGM Score of A and Value Style Score of B. The company’s share price movement over the past year has been robust. The company posted a return of 73.8%, way higher than the broader industry's 8.8%.
Masimo’s strong guidance is a key positive at the moment. The company expects total fiscal 2017 revenues of approximately $769.0 million, up from the previously provided guidance of $759.0 million. Total fiscal 2017 product revenues are projected at approximately $736.0 million, up from the previous guidance of $727.0 million. Royalty revenues projections increased to approximately $33.0 million from the previous guidance of $32.0 million. Fiscal 2017 earnings per diluted share are expected to be approximately $2.80, up from $2.65.
PAREXEL International Corporation : PAREXEL carries a Zacks Rank #2, VGM Score of A and Value Style Score of B. Looking at price performance, PAREXEL represented a stellar return of 27.2%, much higher than the broader industry’s increase of roughly 4.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Headquartered in Waltham, MA, PAREXEL provides clinical research and logistics, medical communications, consulting, marketing, and advanced technology products and services to the pharmaceutical, biotechnology, and medical device industries globally.
Quorum Health Corporation (QHC - Free Report) : Quorum Health carries a Zacks Rank #2, VGM Score of B and Value Style Score of B. Over the last month, the stock has gained 6.6%, significantly higher than the industry’s addition of 1.1%.
To strengthen the company’s core hospitals, management at Quorum Health continues to expand its services and recruit physicians in strategic specialty areas. The company expects operating revenues for full-year 2017 between $2.05 billion and $2.1 billion and adjusted EBITDA in the range of $150 million to $170 million.
Amedisys Inc. (AMED - Free Report) : Amedisys carries a Zacks Rank #2, VGM Score of A and Value Style Score of B. Year to date, the company has been trading above the broader industry. As per the last trading price, the company has gained 18.1% compared to the 1.2% decline of the broader industry over this period.
Amedisys is currently exploring opportunities in the Home Health and Hospice segments. The company’s favorable demographic trend and strategic acquisitions also encourage us. The home health industry is poised for growth over the long haul, driven by the aging U.S. population and home health as a cheaper care modality.
In addition, with continued pressure on the U.S. healthcare system, we believe operators like Amedisys will continue to benefit from increased volume shift from higher-cost institutional settings to a lower-cost environment such as home health.
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