Credit Suisse Picks 7 Health Care Stocks to Own for the Next 6 Months

Editors' pick: Originally published Feb. 2.

Health care stocks are getting hit hard by the stock market turbulence of 2016.

The S&P 500 Health Care Sector Index has fallen 7.6% year-to-date, underperforming the broader S&P 500, which is down 5.1% this year.

Health care companies will be in the spotlight this week, according to TheStreet's Jim Cramer. Investors will have to brace themselves for any sell off as the House Committee on Oversight and Government Reform will hold a hearing on Thursday to examine recent drug price increases.

So what are some of the best investment ideas for health care stocks right now?

Credit Suisse analysts updated a "Top Picks" investment ideas note to clients on Monday. The research note puts forth the analysts' best investment ideas in a variety of sub-sectors for the next six-to-12 months. Analysts were allowed to choose up to three stocks in their coverage area and rank them. The updated exercise resulted in a list of 136 top stock ideas.

The below list of best health care stock ideas are the first ranked picks by Credit Suisse analysts, along with the firm's investment thesis on each stock. We've paired the list with commentary from Jim Cramer, if the stock is owned by his Action Alerts PLUS Charitable Trust Portfolio,

  

1. Celgene
1. Celgene

(CELG - Get Report)
Industry: Health Care, Biotechnology
Year-to-date return: -15.8%

Celgene Corporation, a biopharmaceutical company, discovers, develops, and commercializes therapies to treat cancer and inflammatory diseases in the United States and Internationally.

Credit Suisse's Target Price: $144
Credit Suisse Said: We believe that CELG looks cheap relative to its growth after reviewing current and pipeline products. We see more upside on base business products than consensus and guidance. We like Celgene's pipeline that consists of internal and external candidates that leads us to believe it is best in class.

2. McKesson
2. McKesson

(MCK - Get Report)
Industry: Health Care, Health Care Distribution & IT
Year-to-date return: -19.2%

McKesson Corporation delivers pharmaceuticals, medical supplies, and health care information technologies to the health care industry in the United States and internationally. The company operates in two segments, McKesson Distribution Solutions and McKesson Technology Solution.

Credit Suisse's Target Price: $220
Credit Suisse Said: We believe a positive fundamental backdrop as well as upside to Celesio accretion should support further outperformance.

3. HCA Holdings
3. HCA Holdings

(HCA - Get Report)
Industry: Health Care, Health Care Facilities
Year-to-date return: 5%

HCA Holdings, Inc., through its subsidiaries, provides health care services in the United States.

Credit Suisse's Target Price: $78
Credit Suisse Target Said: Poised to continue to generate above average volume growth and market share gains. Historically low leverage profile suggests continued benefits from capital deployment.

4. UnitedHealth Group
4. UnitedHealth Group

(UNH - Get Report)
Industry: Health Care, Managed Care
Year-to-date return: -1.5%

UnitedHealth Group Incorporated operates as a diversified health and well-being company in the United States.

Credit Suisse's Target Price: $133
Credit Suisse Said: UNH is entering 2016 well-positioned to produce organic share gains in both Commercial & Medicare markets. The stock also now the most de-risked as it relates to continued public health insurance exchange pressure in 2016.

5. Boston Scientific
5. Boston Scientific

(BSX - Get Report)
Industry: Health Care, Medical Supplies & Devices
Year-to-date return: -3%

Boston Scientific Corporation develops, manufactures, and markets medical devices for use in various interventional medical specialties worldwide. The company operates in three segments: Cardiovascular, Rhythm Management, and MedSurg.

Credit Suisse's Target Price: $19
Credit Suisse Said: We believe BSX is well positioned to deliver 4%+ organic top-line growth through the next-gen S-ICD, US quadripolar ICD, US Synergy, US Watchman & European Lotus launches. Given the potential for above-peer margin leverage driving 10%+ EPS growth (also above med-tech peers) we expect BSX's current valuation to expand from in line with peers currently which drives our favorable view on the stock.

6. Eli Lilly
6. Eli Lilly

(LLY - Get Report)
Industry: Health Care, Pharmaceuticals
Year-to-date return: -6.9%

Eli Lilly and Company discovers, develops, manufactures, and sells pharmaceutical products worldwide. It operates through two segments, Human Pharmaceutical Products and Animal Health Products.

Credit Suisse's Target Price: $99
Credit Suisse Said: We rank LLY as our top pick in our coverage. This is based on LLY's strong return to growth story with maturation of its mid-late stage clinical pipeline. Investment positives: (1) The near-term upside we expect from LLY's diabetes drug Jardiance following the recent release of positive cardiovascular outcomes data for the drug; (2) and underappreciated and relatively de-risked phase 3 pipeline (outside of one higher risk asset in solanezumab for Alzheimer's) and (3) management commitment to long-term expense targets and dividend growth.

Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio owns shares of Eli Lilly.

"We like the stock for its amazing pipeline which includes the Alzheimer's drug that Credit Suisse highlight. It is inexpensive given these prospects," Cramer said.

Exclusive Look Inside:

You see Jim Cramer on TV. Now, see where he invests his money and why Eli Lilly is a core holding of his multi-million dollar portfolio.

Want to be alerted before Jim Cramer buys or sells LLY? Learn more now.

7. Medivation
7. Medivation

(MDVN)
Industry: Health Care, Small/Mid-Cap Biotechnology
Year-to-date return: -31.4%

Medivation, Inc., a biopharmaceutical company, focuses on the development and commercialization of novel therapies to treat serious diseases in the United States. It offers XTANDI for the treatment of post-chemotherapy metastatic castration-resistant prostate cancer (mCRPC) patients.

Credit Suisse's Target Price: $49
Credit Suisse Said: Bullish on Xtandi's re-acceleration as sales reps factor into growth figures, TERRAIN/STRIVE publications allow medical education in urology setting and TERRAIN/STRIVE label additions in H2:16 allows for marketing.

 

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