Buy these 3 Breakout Healthcare shares in the event of a sell or correction

Seeing a wall of red numbers on your brokerage account is usually a scary experience, but it doesn’t necessarily mean that you are a bad investor. Market corrections are a reality and almost everyone’s wallet is affected. In my opinion, one of the things that separates qualified investors from less qualified investors is their reaction at a sale. And right now, the market could be in full liquidation in some areas.

Some people might panic, while others will see it as an opportunity to buy stocks they were looking for. In this vein, I have observed a group of three health stocks that are currently expensive. All three have thrived in the chaos of 2020, and all three are likely to be supported by long-term trends in the economy going forward. But, two of the three are down for the year so far, which means they could be nearing buy points. If the market collapses, buying shares in one of the trios might be a good move.

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1. STAAR Surgical

You’ve heard of glasses and contact lenses (and you can even wear a pair right now), but did you know that there are prescription lenses that can be placed inside your eye? STAAR Surgical Society (NASDAQ: STAA) does exactly that: implantable lenses for eye surgery. And business is booming. In the fourth quarter, he said net sales were up 18% year-over-year. Likewise, its gross margin has increased by a few percentage points to reach 74.6% in 2020, and its future is just as bright. The company expects its total addressable market (TAM) to double to nearly 35 million people representing $ 6 billion in sales to 70 million people over the next 30 years, and it is already positioned to continue to capture a copious part of this growth.

So why should investors wait for a sale before buying? In short, because the stock can be extremely overvalued based on its price / earnings (P / E) ratio. STAAR’s final P / E ratio is just over 820, more than double the average of 317 for the healthcare industry. The ratio doesn’t necessarily have to fall to the mid-level for the stock to be a good deal, but even a small step down could make it a more attractive buy.

2. Abiomed

Abiomed (NASDAQ: ABMD) Heart pumps for heart surgery occupy a key niche in the surgical tool market and also help patients recover from serious procedures faster. Treatment using Abiomed’s pump can save 80% of people with heart attacks, which is a huge improvement over the 50% survival rate without it. Likewise, while the stock (hopefully) won’t be the alone while keeping your portfolio healthy, it could provide much needed support for recovery or growth. In 2020, the company’s total revenue increased 9% to $ 841 million. Abiomed’s operating profit and cash flow are growing steadily year on year, as more clinics are certified to use its pumps in the United States, and with $ 651 million in cash, it has plenty. of gasoline in the tank to maintain growth by developing new pumps and other vital heart interventions.

Despite its somewhat weak latest earnings report and moderate market reaction, I still think the stock is more expensive. Quarterly profit growth contracted 10.6% year-over-year, driven by higher cost of revenues and also higher selling expenses. But Abiomed is still rated as a fast growing stock. Its final price-to-sales (P / S) ratio is around 17, which is much higher than its industry average of 6.94. It will likely revert to steady earnings increases over the course of the year, which means that in the event of a stock market crash, the stock will be discounted.

3. Teladoc

After the pandemic forced people to stay at home, Teladoc Health (NYSE: TDOC) has become a household name for its easy-to-use and widely accessible telehealth services. The company sells memberships to insurance companies, allowing their clients to access its physicians through telehealth. Its paid member base – a strong correlate to its recurring revenue – grew 41% in the United States in 2020, reaching 51.8 million subscribers. This certainly helped to double its total annual revenue to $ 1.09 billion in the same period.

But I think Teladoc is still a bit too expensive. It is currently trading at a forward P / S ratio of 14, largely due to its meteoric growth last year. The stock will face headwinds in the near term, as investors shift their funds from technology-intensive growth stocks to commodities and other sectors. Teladoc is not profitable, and management does not expect to grow membership or revenue as quickly in 2021. Both of these are issues in the context of a return to value, if any. As the pandemic begins to subside, people will be more willing to attend in person with their doctor, potentially reducing the demand for telehealth. Still, in the long run, its higher level of convenience means telehealth is here to stay, and Teladoc made such breakthroughs last year that it’s hard to see its brand’s power drop anytime soon. So, I will be looking to recover some stocks if there is a correction that leaves them at a (relative) discount from where they are today.