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Mega-Cap Biotechs Cheapest in Years: 4 to Buy for 2017 Gains

It’s a tired refrain, as we have written about it for over a year, but the beating that the health care sector has taken, especially the biotechs, may be providing the biggest potential winners for 2017. Despite the shrill rhetoric from politicians over drug prices, and the fear of government price controls, the reality is it is very unlikely the Republicans lose the House of Representatives in the upcoming election. While health care policy is unlikely to be favorable for the sector, draconian changes look doubtful.

A recent research note from Jefferies points out that the four largest capitalization biotech stocks are now trading at about 12 times estimated earnings, well below the 16 times for the S&P 500. With the ultimate low for the group historically at 11 times earnings, there appears to be little downside left to the group. Plus the price-to-earnings growth ratio is also extremely low.

Aggressive growth investors should consider positions in the four largest biotech stocks, perhaps nibbling at shares now and filling out positions after the election is over.

Amgen

This biotech giant posted outstanding second-quarter earnings and it remains a top stock for investors to buy. Amgen Inc. (NASDAQ: AMGN) focuses on areas of high unmet medical need and leverages its biologics manufacturing expertise to strive for solutions that improve health outcomes and dramatically improve people’s lives. A biotechnology pioneer since 1980, Amgen has grown to be one of the world’s leading independent biotechnology companies, reaching millions of patients around the world and developing a pipeline of medicines with breakaway potential.

The company posted revenues above expectations and showed strong expense management. It also raised guidance for revenues and earnings, and many on Wall Street think the numbers could be conservative. Amgen also reaffirmed interest in mergers and acquisitions activity as a way to sustain long-term growth.

Many on Wall Street point to the company’s tremendous pipeline and outstanding forward earnings and revenue capabilities. Amgen’s double-digit earnings and revenue growth rate is expected to continue for the foreseeable future because of the company’s very deep clinical pipeline...


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