It's time to buy the dip in healthcare stocks.
"With (year-to-date) gains having been wiped away, we see attractive entry points for many stocks in our universe," RBC Capital Markets analysts wrote in a Feb. 12 note. Here are three of the top healthcare plays to field as the market takes a turn lower.
UnitedHealth Group Inc.
UnitedHealth Group Inc. (UNH) is a "core holding" for healthcare investors, RBC wrote. Now is a good time to make an entrance for the stock, as shares have shed 11.1% over the past two weeks on concerns regarding the partnership among Amazon.com Inc. (AMZN) , Action Alerts Plus holding JPMorgan Chase & Co. (JPM) and Berkshire Hathaway (BRK.A) (BRK.B) . RBC noted that the partnership, however, isn't a cause for concern, as commercialization "if at all, would be many years away."
"We believe the selloff in UNH shares ignores the strong momentum the company is carrying into 2018 across its diversified business lines, particularly in Medicare Advantage, Medicaid and risk-based products, as well as the Optum segments," analysts wrote. Earnings and revenue growth for the company are set to increase further as UNH utilizes strong cash flows and tax reform benefits, RBC added.
UNH stock has 27% upside potential, earning a $280 price target from RBC analysts.
In the managed care organization category, RBC analysts said they favor Anthem Inc. (ANTM) , which has sold off 10.3% in the past two weeks. The company reported strong results Jan. 31, topping analysts' expectations and delivering "attractive guidance," RBC wrote. The company is set up for "strong growth across its Medicare, Medicaid and commercial businesses, which should be complemented by shareholder-friendly use of capital such as the increased dividend and continued share buybacks."
RBC said Anthem CEO Gail Boudreaux is a "major catalyst for better operational performance and long-term growth." Anthem "remains committed" to high-single- to low-double-digit earnings growth over the long term through organic, M&A and strategic means.
Anthem stock has a $285 price target from RBC analysts, implying about 23% upside potential.
HCA Healthcare Inc.
Among providers, RBC analysts favor HCA Healthcare Inc. (HCA) . Shares are down 8.4% from their high but up 10.8% year to date. "The company has a strong history of outperforming the peer group, with SS revenue growth exceeding the industry comp in 18 of the last 20 quarters," analysts said. The company's strong assets and market position paired with favorable cash flow suggest it could continue to take over more market share in the long term.
Fourth-quarter results reported Jan. 30 showed HCA is "positioned to weather difficult operating environments, and it is confident in the long-term outlook, as illustrated by the newly initiated quarterly dividend and significantly expanded capital investment plans, which should further enhance growth," RBC wrote.
HCA stock carries a $117 price target with about 20% upside potential.