2020 Returns by Stock Sector

These 5 Stocks Just Got the Green Light to Buy

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These stocks are surging after the election and could go even higher

One group of stocks is booming after the election, with some up seven- and 10% and more in a single day. In fact, this group had its 10th best single-day return going all the way back to 1998 and on four-times the normal volume!

In this video, I’ll reveal that hot stock sector, why it’s surging and show you the five best stocks to buy right now.

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Best Stocks after the Election

And Nation, I’m excited to bring you this video, a group of stocks that have broken out since the election and I think could go a lot farther. In fact, I think this could be the breakout sector of 2021.

One of these stocks, I’m putting into our 2021 Bow Tie Nation portfolio on Stockcard, We’re just two weeks into our portfolio, already up 4% in that time and outperforming the S&P 500 by 5%.

I’m going to wait to next month to do an update video on the portfolio because I want to get to those five stocks I’m watching. I’ll leave a link below, click through and follow the portfolio on Stockcard. It’s totally free to follow and you’ll get trade alerts anytime I buy or sell from the portfolio, immediately and even before these videos come out.

As a special bonus, I’ve negotiated an exclusive discount for everyone here in the community, use the promo code bowtienation, all one word and lower case, and you’ll get that special discount beyond the two-week free trial.

Sign up on Stockcard for free and make stock-picking easy with the research tool I use! Use promo code: bowtienation for an exclusive discount!

Nation, healthcare stocks have been one of the biggest underperformers this year. You see in a table of stock returns by sector, healthcare is up just 3% in 2020. And prices have gone nowhere.

2020 Returns by Stock Sector -stocks to buy after the election
2020 Returns by Stock Sector

And it’s been on just a few forces that are really weighing on the sector. First you’ve got uncertainty around the ACA, if the healthcare program gets shut down then we could see demand for services fall by anywhere from 15 to 25 million. You’ve also had fears of drug pricing regulation and other regulatory risks and finally, with the pandemic, a lot of higher margin services were postponed.

But this group just had a massive move last week, after the election, the sector was up 5.5% on Wednesday alone, it’s 10th largest single day move in 30 years. Even though the results weren’t yet definitive, investors are looking at split control of Washington and just seeing these dark clouds clear up.

And if you look at the top stocks for the day, you see where the strength is. Drug makers were six of the top 12 best stocks and health plan providers were three of the top five.

Why Healthcare Stocks Could Win Big

With that split in Washington, or just very narrow control, we’re less likely to see big regulatory changes in the healthcare space. It’s a huge sigh of relief and this recent move could be just the beginning.

Even after the move last week, the SPDR S&P Pharmaceuticals ETF, ticker XPH, is up only 4% on the year and trades for a price of just 10.8 times expected earnings. That’s nearly half the 22.7 multiple we see on the overall stock market.

The iShares Healthcare Providers ETF, ticker IHF, is a little more expensive trading at 16-times on that forward PE ratio but still cheap here and these are some great dividend stocks we’ll talk about today.

Top Stocks to Buy Now

Now those two funds will probably do well, as those drug makers and service providers benefit, but the best returns are going to be in finding the top stocks in the space, the five best for your money.

UnitedHealth Group, ticker UNH, is the largest private health insurer in the U.S. as well as a strong business line internationally. Shares were up over 10% on Wednesday alone and pay a 1.6% dividend yield.

The company insures 50 million members covering 15% of the insured population. That puts it well above the next largest rival with just 10% of the market. Combine this scale with a strong health information technology business and a pharmacy benefits manager to negotiate costs and you’ve got a business model that can’t be beat.

In fact, the CVS/Aetna and Cigna/Express Scripts mergers over the last several years were both an attempt to copy the UnitedHealth business model.

And on these types of regulatory risk stocks like we’ll talk about today, I always look at the management effectiveness ratios like the return on assets, that ROA, and the return on invested capital.

Comparing these ratios across stocks is going to show you which management teams are able to really produce, able to use assets and capital to drive a return, even with that regulatory burden.

But when you can find these well run companies…and the government gets out of the way, they can really start to fly!

So here we see the ROIC at UnitedHealth is 15.5% over the past year and the return on assets is 9% – which are both slightly above the industry average which is the sign I’m looking for.

Anthem, ticker ANTM, is a smaller health insurer but still one of the largest with over 42 million members in 23 states and it’s the largest single provider of Blue Cross Blue Shield coverage.

Now I like UnitedHealth but here’s why I like Anthem just a little more and why I’m putting it in our 2021 stock portfolio. Anthem is in just 23 states versus UnitedHealth’s national coverage, but at 42 million members, it’s a close second to the 49 million covered by UNH.

And it’s because, in the states where it operates, Anthem has a much deeper market share, upwards of a third the market. It’s got an exclusive license with Blue Cross in 14 states, which is arguably the most trusted franchise in health insurance.

This all works to give Anthem a lot more negotiating power with providers, helping to lower costs, pass some of that savings on to customers and keep some of it for higher margins.

Revenue grew at a 7% pace over the last three years which the company was able to turn into 20% annual earnings growth. Shares trade for a price of 15-times earnings about a 17% discount from where it traded last year.

I added shares to our 2021 portfolio last week. Again, look for that link below and follow the portfolio on Stockcard to get notifications when I buy or sell anything.

In the drug makers now and a favorite of mine, AbbVie Inc, ticker ABBV and its 5.9% dividend yield.

And Nation, besides the upside potential on these stocks, I love the idea of investing in healthcare companies just as a way to hedge my own costs in retirement. If you look at it, even with Medicare, the average retiree pays up to a third of their drug costs out-of-pocket and it can be as much as fifteen or 20% of your total expenses.

So what better way to hedge those costs than by benefiting from shares of the drug makers?

AbbVie completed its acquisition of Allergan in May which significantly increased the product portfolio for leadership in oncology, immunology and eyecare. In fact, two of its oncology drugs are growing into blockbuster status. One of which, Venclexta, is growing sales by more than a 100% annual rate and did $317 million in the last quarter alone.

Management’s producing almost a 12% return on invested capital and 7.6% ROA. Both are a little below the benchmark here but I think recent cost cuts can boost those. Earnings are expected to jump 16% over the next year, analysts have an average target about 12% higher and that’s beyond the 6% dividend.

This next drug maker, I’ve owned for about a year and it’s just starting to turn around, shares of Teva Pharmaceuticals, ticker TEVA.

Teva got into trouble there for a while. It had an aggressive acquisition strategy that put on a lot of debt and then the opiod lawsuits hit and just wiped it out.

Still, one-in-ten prescriptions in the U.S. is filled by Teva and it’s the largest generics maker in the world. A forward-thinking restructuring plan has cut $3 billion in annual expenses and the company sold off a lot of its unprofitable drugs.

Revenue on generic sales has stabilized and the lawsuits look like they’re all settled or close to a settlement. This one was on the way back up, hitting $13.20 a share in February before the pandemic and analysts have an average target of $12.25 each over the next year. That would be 33% higher and I think it can go even further if you look out three or five years.

Gilead Sciences, ticker GILD, has benefited from its Remdesivir treatment for the virus but I like the drug maker for its pipeline and 4.6% dividend.

Gilead is a leader in drugs treating HIV and Hepatitis, two of the highest profit margin markets in drug-making. In fact, Gilead is so successful in HIV treatments that it serves 80% of the patients in the United States.

Gilead is just an R&D machine, with 38 candidates in its pipeline. That’s 10 in viral diseases, 15 candidates in inflammatory diseases, three of which are in phase three trials for six uses, and 13 candidates in its oncology pipeline, again some with multiple indications that could go blockbuster.

Shares here trade for just 9.7-times earnings, making it the cheapest stock in our list, and those earnings are expected 5% higher over the next year. I think you can bank a solid double-digit return plus the dividend on this one and hold it for the long-term.

Sign up on Stockcard for free and make stock-picking easy with the research tool I use! Use promo code: bowtienation for an exclusive discount!

Healthcare is one of my favorite stock sectors for 2021 and I think these stocks just got the go ahead to run higher. Look for the best stocks in drug makers and health plans to outperform and produce some great returns.

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