Bargains in the Healthcare Sector

While 2016 began on a sour note with one of the worst January performances on record, February and early March brought a strong rally in most of the major indexes. After double digit drops, the S&P 500 remains down only 1.06% from the beginning of the year and only about 5% off its all-time high.
Despite the significant rally, there are still some stocks that have posted major declines and have yet to recover fully. These include some issues in the healthcare sector—some of which are blue chip names in the space.

In the table below we have listed a few representative stocks in the healthcare sector—some of which have had substantial declines and might represent good value to the investor who has a long-term perspective. Some of the greatest declines were in Biotech and Biotech-related issues. Biogen, Illumina and Diplomat Pharmacy are trading at 35-50% declines from their all-time highs. Part of this dismal showing reflects worries about drug pricing in view of the upcoming elections. Diplomat is a specialty pharmacy firm that deals with high priced drugs used in serious or life-threatening illnesses. Diplomat, Illumina, and Biotech in general, all have been discarded by investors fearing political backlash regarding the high cost of drugs.

For patient investors with a 3-5 year (or beyond) outlook, now may be the time to wade through the bargain bin in the healthcare aisle. Caveat Emptor! Sometimes bargain-priced stocks go even lower.

Bargains in the Healthcare Sector
Stock All-time high Price Current Price % Decline
Healthcare Select Sector ETF 77.4 68.59 -11.4
CVS Health 113.65 100.36 -11.7
Walgreens Boots Alliance 97.3 81.41 -16.3
McKesson 243.6 166.4 -31.7
Illumina 242.37 158.9 -34.4
Regeneron Phramaceuticals 605.92 377.12 -37.8
Biogen 480.18 259.74 -45.9
Mallinckrodt 132.47 68.97 -47.9
Diplomat Pharmacy 51.99 26.1 -49.8

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