S&P 500 Giant Leads 5 Stocks Showing Strength In Bear Market

Your stocks to watch for the week ahead are pharmaceutical and medical stocks Eli Lilly (LLY), Vertex Pharmaceuticals (VRTX), Neurocrine Biosciences (NBIX), McKesson (MCK) and health insurance giant Humana (HUM).

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Medical stocks, along with other pharmaceutical stocks and biotech companies, are showing some strength in the lousy current market. LLY stock sits on the S&P 500 index, along with Vertex Pharmaceuticals, Humana and McKesson. All five stocks are showing relative strength, though in some cases the share prices are heading lower. These names are not yet actionable as the market correction intensifies.

Health-care companies are often somewhat insulated from recessionary risks, given how much the government and insurers cover medical costs. So medical stocks often are defensive growth names that perform well in choppy or weak markets.

The stock market correction continued to worsen last week, as Treasury yields soared following the Federal Reserve’s latest big rate hike and hawkish forecasts. The Dow Jones Industrial Average dropped below its June low to its worst level in 22 months. The S&P 500 and Nasdaq aren’t far behind.

Investors should keep an eye on these five medical stocks, but also have a level head. This is not a safe time to be buying stocks.

Eli Lilly Stock

LLY stock edged up 0.2% to 311.46 last week, rebounding from a three-month low on Wednesday. Shares have formed a flat base with a 335.43 buy point, according to MarketSmith analysis. There’s a trendline entry modestly above Eli Lilly stock’s 50-day line.

The relative strength line is not at a new peak, but soared late last week and has been trending higher for several weeks.

On Thursday, the FDA approved an oral lung cancer drug to treat various solid tumors. Also that day, UBS predicted that Eli Lilly’s new diabetes drug, Mounjaro, will generate more than $25 billion in peak annual sales, up roughly $5 billion from its earlier estimate. The FDA has approved Mounjaro in Type 2 diabetes patients.

In early August, Lilly slashed its 2022 earnings outlook after significantly missing second-quarter forecasts. But investors are bullish on Eli Lilly’s prospects, in large part due to Mounjaro.

The Indianapolis-based pharmaceutical multinational has a Composite Rating of 88. It has a 92 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share price movement with a 1 to 99 score. The rating shows how a stock’s performance over the last 52 weeks holds up against all the other stocks in IBD’s database. The EPS rating is 85.

Vertex Stock

VRTX dipped 1% to 283.45 last week, continuing to meet resistance at the 50-day line. Vertex stock has formed a flat base with an official buy point of 306.05.

The RS line is at a new high.

The Boston-based global biotech company dominates the cystic fibrosis treatment market. Vertex is branching out, partnering with Crispr Therapeutics (CRSP) to target genetic diseases.

In early August, Vertex reported better-than-expected second-quarter results and raised full-year sales targets.

Pharmaceutical stock Vertex was the IBD Stock Of The Day on Sept. 12. The company ranks second in the Medical-Biomed/Biotech industry group, ahead of Neurocrine Biosciences. Vertex has a 99 Composite Rating. Its Relative Strength Rating is 95 and its EPS Rating is 99.

Neurocrine Biosciences Stock

NBIX shares sank 2.4% to 103.50 last week, once again testing its 50-day line but staging an upside reversal Friday to close above that key level.

Neurocrine Biosciences is continuing to form a flat base and has an official buy point of 109.36. The flat base is forming just above a prior consolidation. NBIX stock blasted out of that base on Aug. 5 following strong earnings.

Shares have consolidated since then. The RS line is right at highs.

NBIX stock is on IBD Leaderboard.

Neurocrine’s earnings rose 17% in the second quarter with revenue up 31% to $378.2 million. Ingrezza, which treats an involuntary movement disorder called tardive dyskinesia, brought in $350 million in net sales.

The San Diego-based biopharmaceuticals company recently scrapped a high-profile treatment for essential tremor. However, the company has a strong product segment. Neurocrine sells a Parkinson’s disease medication called Ongentys and two women’s health drugs with AbbVie (ABBV).

Neurocrine is expected to ask U.S. regulators to approve Ingrezza for Huntington’s disease patients with movement complications, potentially broadening its consumer base.

Wall Street sees strong earnings over the next year.

NBIX stock has a 97 Composite Rating. Its Relative Strength Rating is 92. And it has an EPS Rating of 81.

McKesson Stock

MCK shares edged down 0.9% to 343.27 last week. McKesson is another stock that has formed a flat base. The shares have a buy point of 375.33. The drug distributor is outperforming the S&P 500, with the RS line hitting a record high on Friday. But MCK stock has been hitting resistance at the 50-day line.

The Irving, Texas-based health care company is a wholesale distributor of medical supplies and equipment. It also is a major pharmaceuticals distributor and has a health care technology solutions business segment.

McKesson boomed in fiscal 2022, but typically reports modest growth. Fiscal Q1 2023 EPS grew 5% while revenue rose 7% to $67.2 billion.

Medical stock McKesson ranks first in the Medical-Wholesale Drugs/Supplies industry group. MCK stock has a Composite Rating of 95. Its Relative Strength Rating is 97. The EPS Rating is 87.

Humana Stock

HUM stock fell 2.6% to 486.90 last week, staging a downside reversal from record highs. Unlike the other medical stocks in this list, Humana has not formed a clear base. Shares tried to clear a short consolidation, hitting a record 514.98 intraday Tuesday, but finished the week back below the 50-day line.

Shares hit a low of 418.69 on June 16 before going on a run to 504.99 on Aug. 22. Investors could use 505.09 as an entry.

Humana topped Q2 earnings estimates in late July, but bumped up guidance to a much-lesser extent, partly due to second-half Covid worries. The company’s earnings grew 26% to $8.67 per share. Revenue grew 15% to $27.72 billion. It raised its full-year guidance to $24.75, which was less than expected.

On Sept. 15, the health insurance giant increased its full-year guidance, now predicting EPS of $25 per share vs. its prior target of $24.75.

HUM stock, which had sold off in the prior two sessions, partly in sympathy with other health insurers, shot up 8.4% that day.

Medical stock Humana is one of the biggest private health insurers in the U.S. and covers around 20 million people. It ranks first in the Medical-Managed Care industry group. It has a Composite Rating of 97. The Relative Strength Rating is 93 and it has an EPS Rating of 88.

Please follow Kit Norton on Twitter @KitNorton for more coverage.

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