Health and healthcare are recurrent themes running through the latest SMID Cap “Rap” research note from Citi analysts Scott T Chronert and Louis L Odette.
Healthcare the fastest out-of-the-gate in 2014
In 2014, to date, healthcare is the best performing sector across the Russell 2000, Russell Mid Cap and Russell 2500 indices as shown in the table below.
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The highlight of the above table is the gain of 7.2% shown by the Pharma/Biotech/Life Sciences sub-sector.
Pharma/Biotech the star performer past two years
The chart of the week shows how the Russell 2000 Pharma/Biotech has outperformed even the Russell 2000 software over the past two years. “It has paid more to be ‘healthy’ than ‘smart,’” quip the Citi analysts.
“Russell 2000 Software, which is where a number of cloud and internet plays reside, has outperformed since early 2012, returning over 60%. Additionally, a small cap internet index we created back in 2012 has performed even better, returning roughly 70% without any contribution from ’12 and ’13 IPOs. Yet, Russell 2000 Pharma/Biotech has beaten both, and has appreciated over 100% over the past two years,” observes Citi.
Lifepoint Hospitals in value focus
The Citi analysts added LifePoint Hospitals, Inc. (NASDAQ:LPNT) to their “Value Creators” SMID Focus List, and estimate the company’s EBITDA could grow 15-20% by 2016. In general, hospitals are likely to benefit from Obamacare, says Citi.
LifePoint Hospitals, Inc. (NASDAQ:LPNT) has a market capitalization of $2.64B and trades at a P/E of 20.88. It is a leading hospital company focused on providing quality healthcare services close to home. Through its subsidiaries, LifePoint operates 60 hospital campuses in 20 states.
Last week, Duke LifePoint Healthcare, the company’s joint venture with Duke University Health System, Inc. signed a definitive agreement to form a joint venture with Wilson Medical Center, a 294-bed health care organization that offers a range of services.
Other healthcare value picks
Two other healthcare stocks figure in Citi’s “Value Creators” SMID Focus List.
Medivation Inc (NASDAQ:MDVN) is a biopharmaceutical company focused on the rapid development of novel therapies to treat serious diseases for which there are limited treatment options. Last traded at $72.78, the stock has a market cap of $5.49B.It was added to Citi’s list on 3/25/2013 and has since gained 64%.
Cynosure, Inc. (NASDAQ:CYNO) is a leading developer and manufacturer of a broad array of light-based aesthetic and medical treatment systems. Its products are used to provide a diverse range of treatment applications such as hair removal, skin resurfacing and scar reduction, as well as the treatment of vascular lesions. Last traded at $26.61, the stock has a market cap of $596M. It found a place on Citi’s list on 9/11/2013 and has since appreciated 12.76%.