Health-care stocks have gone from first to worst — or so it might seem.
After leading the market in 2018, health stocks are trailing the S&P 500 this year, with the group up only 6 percent this year versus the S&P's 11 percent gain. But one stock picker sees three ways to play a potential resurgence in the space — including two stocks that are currently trading at record highs.
Equity strategist Matt Maley told CNBC's "Trading Nation" that his top picks in the sector are Boston Scientific BSX , Danaher DHR and Abbott Laboratories ABT . Danaher and Abbott's stocks both hit 52-week highs on Friday.
"After this big run we've had in the broad market, ... you're going to need to more selective going forward and look at one subsector, one group, within the health-care area," the Miller Tabak strategist said Thursday. "I look at medical devices."
Boston Scientific struck Maley because of its notably positive action in recent months, with shares up over 25 percent since their late-December lows.
"It's broken above its 2018 highs and it's done so in a meaningful way," he said.
Danaher's recent announcement that it will purchase General Electric's GE biopharmaceutical business has lifted its stock, which Maley said was "breaking out" regardless of the news.
Lastly, there's Abbott Labs, which the strategist painted as "much more than just a medical devices company."
"It's broken above its double-top high from the fourth quarter and it's, again, done so in a meaningful way," he said.
"Now, all these names are a little bit overbought on a near-term basis, so they might have to take a breather," Maley said. "But I just think it shows that, after this big run, that we're going to have to be more selective in the health-care group and, really, in all the groups."
Michael Bapis, managing director of Vios Advisors at Rockefeller Capital Management, was slightly more bullish on the health-care sector as a whole thanks to what he called favorable macroeconomic trends like an aging U.S. population, but he also shared a specific pick with CNBC.
"If you have an aging population with innovative technology, companies ... who are flush with cash, they can spend on the R&D, they can spend on the development, they could pay dividends," he said on "Trading Nation." "I would own a company like Bristol-Myers BMY . It's trading at 12 times next year's earnings, giving you a 3.15 [percent] dividend yield, and they have a pipeline that's massive. So we own this space, broad-based space, let's say, for the next six to 12 months. Then we can start to become selective."
The XLV, the health-care sector's tracking ETF, traded lower on Thursday. It has gained about 9 percent in the last 12 months and was trading 5 percent off its 52-week high.
Disclosure: Bapis and his family own shares of Bristol-Myers Squibb. His firm also invests BMY and in XLV.
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