CNBC Stock Blog

Buy These Health Care Stocks: Strategists


Smaller health-care stocks Varian Medical and DaVita are hitting all time highs, so should you be getting in on these so-called "stealth" stocks? Jeff Johnson of Robert W. Baird, and Arthur Henderson at Jefferies & Company, shared their plays.

Finding Stealth Stocks

“If you look at the radiation oncology market, it’s been growing very nicely,” Johnson told CNBC.

Johnson has an “outperform” rating on Varian with a $65 price target.

“It’s a $4 billion industry, probably going to grow 9 to 12 percent over the next 3 to 5 years," he said of Varian's subsector, medical diagnostic machinery. "There’s nothing much in med tech that’s growing that nicely anymore.”

Johnson advised investors to buy the stock.

Meanwhile, Henderson said that while volumes have been weak in health care stocks, companies that offer dialysis treatment have been resilient.

“So a lot of people have been crowding into names like Davita where they can get a safe haven on the volumes,” he said. “But I’d be very careful with this trade—it’s getting very crowded.”

Instead, Henderson recommended that investors move into names such as ExpressScripts or Medco , which are growing at a “much faster rate” and have “much more attractive valuations.”

Henderson has a “hold” rating on Davita and has a price target of $63.

Scorecard—What He Said:

  • Henderson's Previous Appearance on CNBC (Dec. 29, 2009)

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Henderson does not own shares of DVA, MHS or ESRX.

Johnson does not own shares of VAR.