16 Canadian Healthcare and Biotech stocks with Buy ratings

The Healthcare space has taken it on the chin this year, as stocks across the board are down by well into the double digits. But there’s a glimmer of hope for investors, according to iA Capital Markets analyst Chelsea Stellick who delivered an Industry Report to clients on Tuesday where she reviewed the 17 Healthcare stocks in iA’s coverage universe, 16 of which currently have either Buy or Speculative Buy ratings.

The market’s been clearly ignoring Healthcare this year, as displayed by the S&P/TSX Capped Health Care Index which is down a huge 52.9 per cent year-to-date and the SPDR S&P Biotech ETF which is down 26.3 per cent. That’s the near-term picture, but there are plenty of longer-term positives to the space, says Stellick, who pointed out that the 17 healthcare stocks that iA covers currently have an average year-to-date return  of 24.9 per cent, outperforming the wider sector.

“Regardless of this short-term drop, many long-term sector tailwinds remain intact including demographic trends, favourable public policy, increased adoption of technology and government support for innovation. We firmly believe healthcare cannot be ignored and will bring outsized returns as a long-term portfolio holding,” Stellick wrote.

In aid of getting the pulse of the sector, Stellick and iA Capital first crunched the numbers on one central aspect of production, labour, to find out how well companies are navigating the currently tight labour market. Stellick looked at her 17 companies from a human resources perspective by checking data from employee review platforms like Glassdoor and Indeed to gain insights on a number of factors such as diversity and inclusion, work/life balance and compensation. 

Stellick found that the companies under her coverage all have “respectable” ratings on the various factors, with Health Tech and Biotech companies on average scoring higher than Consumer Health Staples and Health Operators companies. The positive ratings show that these companies likely aren’t facing trouble when it comes to the labour end of the equation, Stellick argued.

“Employee opinions provide positive outlooks that confirm the YTD share performance of our coverage universe is not based on company-specific factors but on sector and macro factors. These data indicate that the labour input of these companies is healthy over the medium-term,” she said.

Stellick also looked at the share structure for each of iA’s 17 companies to assess the degree of insider and institutional ownership, with the common understanding being that both are supportive of longer-term, more stable outlooks for companies: strong insider ownership shows that management has skin in the game and a large degree of institutional as opposed to retail investment often indicates a higher degree of patience for long-term development of a company and stock. 

Overall, Stellick found that several of iA’s covered companies have both high levels of insider ownership and positive transactional value, which are indicative of share support. In particular, Stellick pointed to high levels of shareholder ownership by the top ten holders for Dialogue Health Technologies, Carebook Technologies and Valeo Pharma.

Finally, Stellick noted recent equity raises by small cap Canadian biotech firms Bellus Health and NervGen Pharma as indicating renewed investor interest and activity in the space.

“As larger pharma companies seek to extend and expand their portfolios, we believe there is the potential for the takeout of some of our biotech names after reaching clinical milestones and FDA approval without posing any antitrust concerns,” Stellick wrote.

Below is a run-through of iA Capital’s 17 Healthcare Sector stocks. Note that all projected returns are listed as of the date of iA Capital’s report.

Consumer Health Staples

DRI Healthcare Trust (DRI Healthcare Trust Stock Quote, Charts, News, Analysts, Financials TSX:DHT.U)

Rating: Buy

Target Price: $13.00

Projected Return to Target: 42 per cent

HLS Therapeutics (HLS Therapeutics Stock Quote, Charts, News, Analysts, Financials TSX:HLS)

Rating: Buy

Target Price: $25.00

Projected Return to Target: 94 per cent

Neighbourly Pharmacy (Neighbourly Pharmacy Stock Quote, Charts, News, Analysts, Financials TSX:NBLY)

Rating: Buy

Target Price: $38.00

Projected Return to Target: 64 per cent

Valeo Pharma (Valeo Pharma Stock Quote, Charts, News, Analysts, Financials TSX:VPH)

Rating: Buy

Target Price: $1.40

Projected Return to Target: 122 per cent

Healthcare Operators

CareRX (CareRX Stock Quote, Charts, News, Analysts, Financials TSX:CRRX)

Rating: Buy

Target Price: $8.00

Projected Return to Target: 114 per cent

Hamilton Thorne (Hamilton Thorne Stock Quote, Charts, News, Analysts, Financials TSXV:HTL)

Rating: Buy

Target Price: $2.50

Projected Return to Target: 56 per cent

Microbix Biosystems (Microbix Biosystems Stock Quote, Charts, News, Analysts, Financials TSX:MBX)

Rating: Buy

Target Price: $1.25

Projected Return to Target: 155 per cent

Medical Facilities (Medical Facilities Stock Quote, Charts, News, Analysts, Financials TSX:DR)

Rating: Hold

Target Price: $10.00

Projected Return to Target: 2 per cent

Quipt Home Medical  (Quipt Home Medical Stock Quote, Charts, News, Analysts, Financials TSXV:QIPT)

Rating: Buy

Target Price: $14.00

Projected Return to Target: 104 per cent

Healthcare Technology

Carebook Technologies (Carebook Technologies Stock Quote, Charts, News, Analysts, Financials TSXV:CRBK)

Rating: Buy

Target Price: $9.50

Projected Return to Target: 268 per cent

Dialogue Health Technologies (Dialogue Health Technologies Stock Quote, Charts, News, Analysts, Financials TSX:CARE)

Rating: Buy

Target Price: $9.50

Projected Return to Target: 233 per cent

Biotechnology

Alpha Cognition (Alpha Cognition Stock Quote, Charts, News, Analysts, Financials TSXV:ACOG)

Rating: Speculative Buy

Target Price: $8.00

Projected Return to Target: 94 per cent

Arch Biopartners (Arch Biopartners Stock Quote, Charts, News, Analysts, Financials TSXV:ARCH)

Rating: Speculative Buy

Target Price: $6.00

Projected Return to Target: 73 per cent

IMV Inc (IMV Inc Stock Quote, Charts, News, Analysts, Financials TSX:IMV)

Rating: Speculative Buy

Target Price: $5.00

Projected Return to Target: 681 per cent

LexaGene Holdings (LexaGene Holdings Stock Quote, Charts, News, Analysts, Financials TSXV:LXG)

Rating: Speculative Buy

Target Price: $0.50

Projected Return to Target: 270 per cent

NervGen Pharma (NervGen Pharma Stock Quote, Charts, News, Analysts, Financials TSXV:NGEN)

Rating: Speculative Buy

Target Price: $6.00

Projected Return to Target: 179 per cent

Sernova Corp (Sernova Stock Quote, Charts, News, Analysts, Financials TSX:SVA)

Rating: Speculative Buy

Target Price: $3.00

Projected Return to Target: 175 per cent