2 Healthcare Names I'm Buying as Equities Break 4-Week Losing Streak
Small- and mid-cap healthcare stocks have their attractions in an uncertain market.
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Stock rose last week, although the rebound was quite muted.
The NASDAQ gained 0.2% while the S&P 500 climbed by 0.5%. Not much of a rally as rallies go, but good enough to break equities' four-week losing streak. The uncertainty that has descended upon the market over the past four to six weeks is likely to remain with us for a while. Some form of "reciprocal tariffs" are scheduled to go into effect on April 2, adding to the angst around fast changing trade policies.
Concerns about a slowing economy also continue to rise. Both FedEx Corporation FDX and Nike NKE joined myriad other multi-national companies last week in scaling back forward expectations. The potential impacts of tariffs and uncertainty about the economy were two core reasons for the more conservative guidance. Both stocks had significant pullbacks in their shares to close out the trading week.
I continue to like small- and mid-cap biotech, biopharma and healthcare names. They tend to get the vast majority of their revenues domestically and should see few impacts from new tariffs. There are numerous names that sport reasonable and, in many cases, attractive valuations. These areas of the economy are also nicely recession resistant and should hold up well should the country experience an economic contraction in coming quarters. Pharma might also benefit should the new administration be successful in addressing trade practices that have made American firms bear an outsized burden as far as shouldering R&D costs across the global industry. This is a key reason prescription drug prices for compounds brought to market by American firms are so much lower in Europe and Canada, for example.
I added some shares via covered-call orders in Cormedix CRMD last week. This is a name I first profiled 10 weeks ago. The company recently brought to market an antimicrobial catheter lock solution called DefenCath, that could quickly develop into a "best of breed" solution across the industry. The initial marketing rollout of DefenCath is going well and the company saw a huge sub-sequential surge in fourth quarter sales. The stock is down some 15% from recent highs in mid-January thanks to the recent volatility in the markets.
I have also recently added to my stake in Kura Oncology KURA. This is a "sum of the parts" trade for me and one I can enhance using covered-call orders. The company’s main asset is called ziftomenib and is being evaluated to treat several different forms of acute myeloid leukemia. The compound is currently in several ongoing studies, including one registrational trial.
The stock got knocked down hard in November when Kura signed a collaboration agreement with Kyowa Kirin. It was a solid deal that involved a $330 million upfront payment, but investors reacted very negatively as it took a near-term buyout scenario off the table. Under the arrangement, Kura can also earn up to $420 million in milestone payments over the next two years. While several years away from potential commercialization, Kura’s primary candidate has considerable promise, and the clinical-stage concern has another wholly owned drug candidate in earlier stage development. With the recent pullback in the stock, the shares sell for less than the net cash Kura ended FY2024 on its balance sheet.
At the time of publication, Jensen was long CRMD and KURA.
