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4 Growth Stocks to Buy Amid Obamacare Repeal Talks

Zacks Equity Research

Affordable Care Act (ACA) has been one of the most discussed topics during the 2016 U.S. presidential election. Even after a month, it has been contributing to the discord in the healthcare investment market.

Much has already been discussed about ACA, popularly known as Obamacare. The act was initiated seven years back to enhance health insurance quality and affordability, lower the uninsured rate by expanding insurance coverage and reduce the cost of healthcare.

However, with the victory of Donald Trump, the fate of Obamacare is undecided and with that the future of 21 million enlisted Americans is also at stake.

This is because Trump has promised to repeal the policy and introduce a tax-free reformed one in which no person would be under the obligation to buy an insurance policy unless required.

Will Obamacare Stay?

Trump has labeled Obamacare as a disaster and has promised to repeal the act completely, offering a much affordable alternative. However, he seems to reconsidering his decision to provide "great health care for much less money”.

Obamacare prevents insurance companies from denying coverage to people with pre-existing conditions, such as cancer, or charging people higher or lower fees based on their health status. Trump said he would repeal Obamacare but maintain the provision in which insurers must cover people with pre-existing conditions.

Economists are also segregated in two parts on what the future of Obamacare should be. Many analysts think that Obamacare cannot be repealed or replaced totally as the plan drove the rate of the uninsured to a historic low. Meanwhile, for many, Obamacare has been a drag for medical insurance companies.

In this contradictory scenario, while we await an outcome on health policy debate, investors are finding it difficult to pick solid healthcare stocks that can earn stable income hedging the promiscuous market scenario.

Accordingly, it is wiser to play safe and invest in growth stocks rather than in momentum or value ones. The increasing market volatility makes the momentum strategy highly risky, while value investing does not find many takers in the current market scenario.

Growth stocks are fundamentally strong businesses aiming to make money for investors over the long run rather than the short run, especially when the stock market is volatile.

Screening Criteria

We have selected four growth stocks on the basis of certain parameters. The stocks boast either a solid Zacks Rank #1 (Strong Buy) or 2 (Buy), have a Growth Style Score of ‘A’ or ‘B’ and have historical sales and expected earnings growth rate of 20% or more.

Our Growth Style Score encompasses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of growth. Our research shows that stocks with Growth Style Scores of ‘A’ or ‘B’ when combined with a Zacks Rank #1 or 2 offer the best investment opportunities in the growth investing space.

Key Picks

Cardiovascular Systems, Inc. CSII – Headquartered in St. Paul, MN, Cardiovascular Systems is a medical device manufacturer that develops and commercializes innovative solutions to treat patients with peripheral and coronary arterial diseases, including those with arterial calcium. The company sells its products through direct sales force in the U.S. To date, 146,000 of Cardiovascular’s products have been sold across the U.S.

The company has a Zacks Rank #2 and Growth Style Score of ‘A’. It has a long-term expected earnings growth rate of 22.5% with 5-year historical sales growth of 23.2%. In the last six months, the stock has rallied 42.8%, compared to the 4.6% decline of the Zacks categorized Medical Products industry.

Medidata Solutions, Inc. MDSO – Medidata Solutions is a NY-based global SaaS technology company that specializes in the development and marketing of cloud-based applications and data analytics to carry out operations throughout clinical trials.

Medidata has generated a 10.4% return in the last six months compared to a 4.6% decline of the Zacks categorized Medical Industry. It has a sales growth of 20.9% in the last five years. The stock has a Growth Style Score of ‘B’ and long-term expected earnings growth rate of 22.3%. The company carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Regeneron Pharmaceuticals, Inc. REGN – Tarrytown, NY-based Regeneron is a biopharmaceutical company focused on the discovery, development and commercialization of treatments targeting serious medical conditions. The company’s portfolio consists of three marketed products – Eylea (for several eye diseases), Praluent (heterozygous familial hypercholesterolemia) and Arcalyst (cryopyrin-associated periodic syndromes including familial cold auto-inflammatory syndrome and Muckle-Wells syndrome in adults and children aged 12 years and older).

The stock has a long-term expected earnings growth rate of 21.6% with a 5-year sales growth of 56.6%. Regeneron has a Zacks Rank #2 and a Growth Style Score of ‘A’. The company’s share price has surged 4.1% considerably surpassing the Zacks categorized Medical-Biomed/Genetics Sub Industry of 5.0% decline.

Veracyte, Inc. VCYT – Based in San Francisco, CA, Veracyte is a diagnostics company which pioneers in the field of molecular cytology to improve patient outcomes and lower healthcare costs. The company’s main goal is to allow clinicians to make better decisions.

Veracyte carries a Zacks Rank #2 and a Growth Style Score of ‘B’. The company has a long-term expected earnings growth rate of 25% and a 5-year sales growth rate of 47.2%. In the majority of the last six months, the company has gained 42.3%, which is way better than the Zacks Categorized Medical Products industry’s 4.6% decline.

It is clear from the discussions that the above-mentioned stocks have a better price performance compared to their respective industries. Although these stocks make expensive bids at present, we encourage investors to add them to their portfolio considering the enormous long-term growth prospects they have.

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MEDIDATA SOLUTN (MDSO): Free Stock Analysis Report
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