Four bargain healthcare stocks

There are a lot of positives on the horizon for the healthcare sector. But you wouldn't think it - US large-cap pharmaceuticals are trading on almost historic lows right now. Here, professional investor Samuel Isaly tips four medical stocks set to profit from the biotech boom.

Each week, a professional investor tells MoneyWeek where he'd put his money now. This week: Sam Isaly, Orbimed Capital, Manager of the Worldwide Healthcare Trust.

There are many positives on the horizon for the healthcare sector, not least the bargains available for savvy investors. Whilst other sectors of the equity markets are reaching new highs, valuations of US large-cap pharmaceuticals are trading close to historic lows about ten times estimated 2011 earnings compared to 13 times for the broader US stockmarket. The pipeline of new drugs coming onto the market is encouraging, as the industry recovers from a fallow period spanning much of the past decade.

MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

One of our best-performing stocks has been Sinopharm Group Co (HK: 1099), the largest pharmaceutical company in China. It distributes traditional Chinese medicine as well as Western-style drugs. Sinopharm's business model of aggressive acquisitions has been well rewarded and we expect future growth rates to remain very attractive. Over the long term the stock should benefit from demographics in 2000, only 7% of China's population was over 65, but by 2025 that is forecast to rise to 15%. We have also gained emerging-markets exposure through Western companies such as GlaxoSmithKline (LSE: GSK), which has growing businesses in India and China.

Another stock I would recommend is Allergan (NYSE: AGN) in Irvine, California. Allergan is the world's leading marketer of Botox. It develops and commercialises products for eye care and one of its most intriguing offerings is Latisse, the first and only FDA-approved treatment for lengthening eyelashes. Allergan, which also focuses on neurology and dermatology, has almost 1,000 staff deployed in research and development.

Already a market leader, global powerhouse Johnson & Johnson (NYSE: JNJ) is set to continue outpacing competitors. Employing more than 119,000 people across 57 countries, it was the first of the major pharmas to emerge from its 'patent cliff'. For J&J this fell in 2009 and 2010 compared to the wider industry low point coming in 2012. Furthermore, J&J has the best new product flow of any major pharmaceutical company. It still boasts a pipeline with several potential blockbusters in late-stage development. The company is also very well diversified across pharmaceuticals, medical devices, diagnostics and consumer healthcare.

MoneyWeek

MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.