While some say the future is tech, I’d like to add another sector to that viewpoint… healthcare. Healthcare has previously been considered a defensive sector, but with the growth in biotech and medical services companies to meet the demands of the coronavirus pandemic, the future of these industries, and the sector overall, look quite promising. Which is why I’m highlighting four stocks today that could soar in 2021 and beyond.
Beyond COVID, the future of healthcare will gain from an aging global population and a growing middle class in developing countries. These demographics will demand more treatments and medical care over time, leading to a boom for the sector. That’s why I am looking at innovative companies that can fill the gap between current healthcare needs and the future.
Each of the following healthcare companies has the potential to deliver incredible returns over the long-term: Seattle Genetics, Inc. (SGEN), Amedisys Inc. (AMED), LHC Group (LHCG), and Masimo Corporation (MASI).
Seattle Genetics, Inc. (SGEN)
SGEN is a biotech company that focuses on developing cancer therapeutics. Its lead lymphoma drug, Adcetris, has performed very well since it launched, and it is the primary growth catalyst for the company. The drug’s label has also expanded, which has provided more revenue for the company. The company also has several drugs in its pipeline testing in phase 3 trials for a wide range of cancers.
Once these drugs are approved, it will provide the company more cash to fund new drug development. SGEN also received approval for Padcev to treat patients with metastatic bladder cancer and Tukysa to treat metastatic HER2-positive breast cancer. The company has a deal with Merck (MRK), which plans to buy a 2.9% stake in the company. The two companies are co-developing and selling SGEN’s breast cancer therapy, ladiratuzumab vedotin.
SGEN reported its latest financial results last week, and both earnings and revenue destroyed analyst expectations. EPS came in at $3.50 in its most recent quarter, a massive jump from a loss of $0.55 in the same quarter last year. The stock is rated a “Buy” in our POWR Ratings system, with a grade of “A” for Peer Grade and a “B” for Trade Grade. The stock is also ranked #10 in the Biotech industry.
Amedisys Inc. (AMED)
AMED is a healthcare services company that brings healthcare to the home by providing home healthcare services, hospice services, and personal care services. This company will undoubtedly benefit from an aging population and the growing demand for in-home health services. It is already benefiting from the pandemic as more people have been forced to receive medical care at home.
The company has also benefited from recent acquisitions of hospice care providers Asana Hospice, RoseRock Healthcare, CCH, and AseraCare. The acquisition of AseraCare, which was just completed in June, strengthened its hospice care business. AMED now offers its services at over 500 locations in the U.S.
AMED reported its earnings on Monday and beat analyst expectations for both EPS and revenue. Revenue grew by 10% to $544 million, and earnings increased by 32.2% to $1.52. Growth was led by a rebound in hospice care. The stock is rated a “Strong Buy” in our POWR Ratings system. It holds grades of “A” for Trade Grade, Buy & Hold Grade, and Peer Grade. It has a grade of “B” for the remaining POWR component, Industry Rank. AMED is ranked #2 out of 70 stocks in the Medical – Services industry.
LHC Group (LHCG)
LHC provides post-acute health care services to patients through its home nursing agencies, community-based services agencies, hospice agencies, and long-term acute care hospitals. This stock is another play on the needs of an aging population. Similar to AMED, the company has been gaining from an increase in hospice admissions.
The firm has been able to grow through acquisitions and joint ventures. It recently finalized a joint venture partnership with Orlando Health to boost its home health and home and community-based services. The company anticipates the joint venture to account for nearly $3.5 million in additional annual revenue. LHCG also had a pipeline of growth opportunities in the M&A space to provide future inorganic growth.
The stock has certainly performed well this year, up 62.4% year to date. Keep an eye on the stock tomorrow as it is expected to report earnings after the close. LHCG is rated a “Strong Buy” in our POWR Ratings system. It has grades of “A” for Trade Grade, Buy & Hold Grade, and Peer Grade, and a “B” for Industry Rank. The stock is also ranked #3 right after AMED in the Medical – Services industry.
Masimo Corporation (MASI)
The last stock on this list is a medical device business that focuses on noninvasive patient monitoring. The company started by developing signal processing algorithms that measure blood oxygenation levels through pulse oximetry. It has now expanded this know-how into various measurements and applications such as remote monitoring and hospital automation.
In critical care situations, pulse oximetry is often essential for patient monitoring. The company believes that it can improve patient care and reduce hospital costs, and is looking to expand its expertise to non-critical care applications, which should drive future growth. Another growth catalyst is its hospital automation program, which involves merging central monitoring with bedside vital sign systems. This service is a software-as-a-service (SAAS) business, which would provide recurring income at per-bed cost for hospitals of $1,000 to $5,000.
Another pipeline product that could generate substantial revenue is its Opioid SafetyNet solution, designed to monitor opioid overdose risk and alert emergency contacts if needed. MASI reported its latest financial results last week, with both earnings and revenues outperforming analyst expectations. The stock is rated a “Buy” in our POWR Ratings system, with a grade of “A” for Trade Grade and Peer Grade and a “B” for Buy & Hold Grade and Industry Rank.
Want More Great Investing Ideas?
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David spent eleven years as a Consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|SGEN||Get Rating||Get Rating||Get Rating|
|AMED||Get Rating||Get Rating||Get Rating|
|LHCG||Get Rating||Get Rating||Get Rating|
|MASI||Get Rating||Get Rating||Get Rating|