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James Li
James Li
Articles (1139)  | Author's Website |

4 High-Quality Health Care Companies for 2020

Stocks to consider as China agrees to purchase $200 billion in US goods, including pharma

January 15, 2020 | About:

According to the All-in-One Screener, a GuruFocus Premium feature, four health care companies with high financial strength and profitability are Biogen Inc. (NASDAQ:BIIB), Illumina Inc. (NASDAQ:ILMN), Masimo Corp. (NASDAQ:MASI) and Novo Nordisk A/S (NYSE:NVO).

China agrees to purchase $200 billion worth of U.S. goods as part of trade deal, including pharma products

On Wednesday, Chinese President Xi Jinping and U.S. President Trump signed “phase one” of their landmark trade deal, which includes China purchasing $200 billion in U.S. goods over the next two years. Manufactured goods, which include industrial equipment, electric equipment and pharmaceutical products, account for approximately $33 billion this year and $45 billion in 2021. Pharmaceutical products include human blood for therapies and antibiotics.

Dow nearly fails to close above 29,000

Although the Dow Jones Industrial Average closed at 29,031.23, up 91.56 points from Tuesday’s close of 28,939.67, the Dow closed approximately 96 points off the intraday high of 29,127.59 as investors raise questions regarding phase two of the trade deal. According to CNBC, Baird investment strategist Willie Deliwche said that the market risk hinges on the possibility of the U.S.–China trade negotiations deteriorating throughout the year. CNBC added that phase one of the trade deal “does not remove existing U.S. tariffs on Chinese goods” and fails to address how to curb intellectual property theft.

Health care stocks offer good growth potential

As China increases purchases of U.S. pharma products, investors can seek opportunities in health care companies that have high financial strength and profitability. The All-in-One Screener listed four such companies as of Wednesday.

Biogen

Cambridge, Massachusetts-based Biogen manufactures drugs and therapies for multiple sclerosis. GuruFocus ranks the company’s profitability 10 out of 10 on several positive investing signs, which include a five-star business predictability rank and operating margins that have increased approximately 4.3% per year over the past five years and are outperforming over 98% of global biotech competitors.

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Biogen’s financial strength ranks 7 out of 10: While the company has a strong Altman Z-score of 4.8, its debt-to-equity ratio of 0.46 underperforms 65% of global competitors. Despite this, Biogen’s valuation ranks 9 out of 10 on the heels of price-earnings and price-to-free-cash-flow ratios near 10-year lows and outperform over 82% of global biotech companies.

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Gurus with large holdings in Biogen include PRIMECAP Management (Trades, Portfolio) and the Vanguard Health Care Fund (Trades, Portfolio).

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Illumina

Illumina develops microarray and genome sequencing machines for analyzing genetic material. GuruFocus ranks the San Diego-based company’s profitability 10 out of 10 on several positive investing signs, which include expanding profit margins, a five-star business predictability rank and a return on assets that outperforms 87.93% of global competitors.

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Illumina’s financial strength ranks 7 out of 10: Even though the debt-to-equity ratio underperforms over 60% of global competitors, the company has a robust Altman Z-score of 12.93 and solid interest coverage of 14.98.

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Gurus with large holdings in Illumina include Andreas Halvorsen (Trades, Portfolio) and Spiros Segalas (Trades, Portfolio).

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Masimo

Irvine, California-based Masimo focuses primarily on noninvasive patient monitoring. GuruFocus ranks the company’s financial strength and profitability 9 out of 10 on several positive investing signs, which include robust interest coverage, debt ratios that outperform over 85% of global competitors and a return on equity that outperforms 87.31% of global companies that produce medical instruments and supplies. Additionally, GuruFocus ranks Masimo’s business predictability 3.5 stars out of five.

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Novo Nordisk

Denmark-based Novo Nordisk manufactures and markets a variety of human and modern insulins. GuruFocus ranks the company’s profitability 10 out of 10 on several positive investing signs, which include a five-star business predictability rank and operating margins that have increased approximately 2.6% per year over the past five years and are outperforming over 97% of global competitors.

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Novo Nordisk’s financial strength ranks 8 out of 10 on the back of strong interest coverage and a robust Altman Z-score of 10.69.

Disclosure: Long Biogen.

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About the author:

James Li
I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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