Check Out These 2 Undervalued Drugmakers

The markets have continued to grind up in trading this week. From the pre-market futures it appeared that we would see a down opening today, however. Concerns about spiking confirmed Covid-19 cases in states that are reopening their economies like Arizona, Florida and Texas, looks like they have the upper hand today over optimism about a strong economic rebound. This remains my biggest worry around equities as well. I think it is clear the costs of another shutdown - massive economic disruption, increase in drug and alcohol abuse, suicides, other negative health impacts - far outweigh any benefits. This is especially true compared to employing other prudent measures - social distancing, masks in public places, cancellation of large events. Waiting for a vaccine to be developed before opening the economy seems as much folly as waiting for Godot. In my opinion, the country just needs to suck it up like it did in the 1968 Hong Kong flu outbreak or the 1957 Asian flu pandemic, both of which killed over 100,000 Americans. Unfortunately, that is not the narrative of so much of the media. Therefore, lock downs on a regional basis remain entirely possible. Of course, this would tank the markets. Worries around this possibility was a key trigger in the approximately 7% daily plunge in stocks on June 11th. This is the primary reason I remain cautious on the market and continue to build up 'dry powder' within my portfolio as so many of my covered call positions expire in the money. I also don't see a whole lot of value left in the market after equities huge surge from their late March Covid-19 meltdown lows. However, here are a couple of healthcare names that do appear undervalued. I plan to add some additional exposure to each on the next 'hiccup' in the market using my usual covered call strategy. ANI Pharmaceuticals has had a year it would like to forget. The specialty pharmaceutical company focused on the development and marketing of generic and branded drugs with niche or high barrier to entry characteristics, replaced its long-time CEO earlier this year. As can be seen in the above chart, the stock has been more than cut in half this year. The company is well diversified with its top 10 products encompassing approximately 40% of overall revenue. This may change in the near future. ANI Pharmaceuticals filed a marketing application in late March seeking approval to reintroduce Purified Cortrophin Gel. The rights to this compound were acquired from Merck in 2016 and the product is poised to take market share from Mallinckrodt's top seller Acthar Gel. Approval could lead to a substantial revenue boost. The stock is hardly expensive here at around seven times this year's expected profits. Another diversified drugmaker that looks like a good value here is the larger and much better-known Bausch Health Companies , until recently known as the notorious Valeant Pharmaceuticals. The company still has a lot of debt on its balance sheet but has cleaned house and seems well on its way to a brighter future. The stock is slightly cheaper than ANIP at just over six times earnings. The company generated some $1.5 billion in operational cash flow in FY2019. $900 million of that was used to retire debt, none of which matures until 2022. The stock has lost approximately a third of its value so far in 2020. Both Citigroup and Jefferies have assigned new Buy ratings on Bausch in the second quarter. Both names seem to have put in bottoms in recent months and would appear to have little downside given their low valuations. This is more than I can say for most of the market after its recent huge rise.

Check Out These 2 Undervalued Drugmakers

I plan to add some additional exposure to each on the next 'hiccup' in the market using my usual covered call strategy.

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Very good quarterly numbers from Bassett Furniture (BSET)

First Half Results - Putrid Second Half Results - Likely to Be Much Better

We Should Be in for Better Starting Soon

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