The stock market is still strong, but with sub-par earnings and macro challenges on the way, some stocks likely have nowhere to go but down. These five health care stocks are the most overpriced right now.
Back in March the Dow was setting record highs almost every day and the S&P 500 just hit its record last week when it closed above 1,700 for the first time. However, with sub-par earnings and macro challenges on the way, some stocks likely have nowhere to go but down.
While Goldman Sachs’ economist David Kostin expects 7% returns over the next 12 months, according to Business Insider, he also sees stocks with huge downsides.
In Kostin’s US Monthly Chartbook, he lists 40 stocks with the most downside relative to Goldman’s price targets. If a stock drops 40% (as one is expected to do in order to be fairly priced), investors have a lot to lose.
Some investors are already ahead of the game. For instance, the stock with that 40% downside, Advanced Micro Devices, is also one of the most shorted stocks right now. This is all likely because the company was downgraded by Credit Suisse and Morgan Stanley and its stock is down 5% over the past year.
Other stocks that appear in Kostin’s list and are also being heavily shorted right now are Garmin, U.S. Steel and Cliffs Natural Resources.
So here are the stocks riding high in the health care sector that Kostin, and Goldman, believe have the most downside to their price targets. Full list of 40 is here.
Open prices are as of Aug. 7 and from Yahoo! Finance.
5. C.R. Bard
Downside to target: 11%
Open price: $115.68
Industry: Medical instruments and supplies
Bard, a medical equipment company, is up almost 14% year to date and is hovering near its 52-week high of $116.43.
4. Boston Scientific
Downside to target: 18.5%
Open price: $11.13
Industry: Medical appliances and equipment
Boston Scientific is flying high in 2013, up 90% year to date. It’s 52-week range is wide: $5.04 to $11.49.
3. Hospira Inc.
Downside to target: 18.9%
Open price: $41.07
Industry: Drug delivery
Hospira’s Q2 earnings of 55 cents per share beat the consensus estimate, according to Goldman, but revenue dropped slightly. The stock is up 18% from a year ago.
LifeCare PCATM Infusion System. Hospira.com
2. Humana Inc
Downside to target: 21.1%
Open price: $91.90
Industry: Health care plans
Humana just hit its 52-week high during trading on Aug. 7 and its Q2 earnings came in with an EPS of $2.75, beating analyst expectation so of $2.47, according to Goldman.
1. Celgene Corp
Downside to target: 23.1%
Open price: $141.51
In the last two months, Celgene’s stock price spiked nearly 20% and it has a huge 52-week range with a low of $69 and a high of $149.92.