Pharma's cheap stocks spell investment opportunity for traders: JP Morgan

An employee works on the production of insulin pens at the factory of the US pharmaceutical company Eli Lilly in Fegersheim, France.
Frederick Florin | AFP | Getty Images

Pharmaceutical stocks are trading at one of their largest discounts to the market in nearly 10 years, J.P. Morgan told clients Monday.

"This underperformance reflects ongoing drug pricing concerns, many of which are either well reflected in estimates or unlikely to come to fruition for the foreseeable future," analyst Chris Schott wrote. "We see an attractive opportunity to revisit an admittedly out-of-favor sector with a mix of new launch driven sales/earnings upside and capital deployment/M&A representing potential catalysts for the space."