New Trade for June 21st, 2023

Companies that operate in industries like health care, utilities and consumer staples are known to hold up well during economic downturns because their offerings are needed in all phases of the business cycle.

Traditionally one of the most stable and recession-resistant sectors, everyone needs healthcare at some point regardless of income status.  “The defensive aspects of the sector, while not fully appreciated at times over the past few years, is beginning to kick-in in a rather meaningful way,” said Jared Holz, a healthcare strategist at Oppenheimer.   

Today we’re focusing on a name offering defensive growth. It’s one of the biggest bargains from the desirable healthcare sector with a bevy of built in advantages over peers from the group.   

TEVA Plarmeceutical Industries LTD (TEVA) 

The global leader in generic drugs, Teva Pharmaceutical, is currently trading at an undeniably low 3x forward price-to-earnings multiple.  One reason the stock is so cheaply priced right now is its high debt load of $20.7 billion as of the end of March. But that’s down from $21.2 billion as of the end of last year. And with the company projecting up to $2.1 billion in free cash flow for 2023, it could have room to pay down more debt this year.

Teva recently announced an agreement with Johnson & Johnson that will allow it to launch its Stelara biosimilar, AVT04, in the U.S. market by Feb. 21, 2025. Generating just under $10 billion in revenue for the healthcare giant last year. Stelara is a huge moneymaker for J&J and will provide consumers with a lower-priced alternative that could help accelerate Teva’s growth.

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