Regeneron Pharmaceuticals Inc and Biogen Inc are Jim Cramer’s top picks for 2016. Cramer has been a long-time votary of the group of stocks he calls the “four horsemen of big pharma” that also include Gilead Sciences, Inc. and Celgene Corporation . And he thinks investors will be well served to load up on these stocks as they prepare for 2016.
“While there are hundreds of smaller companies working on revolutionary things…these four players often have a hand in them and they are likely to command the most attention from the stock market next year,” Cramer said on CNBC.
“Going into 2016, this market is going to be starved for growth. And with so many sectors slowing, biotech is the natural place to look,” Cramer added.
Biotech stocks have had a wild and volatile year to date. Shares, including Regeneron, started the year with a bang, rallying higher. But the sector came under intense political pressure over rising prices, leading to the group plunging en masse. However, it’s important to note that regardless of the recent under performance, the NASDAQ Biotech Index has still managed to dramatically outperform the broader averages.
Biogen, Celgene are Past their Worst
Biogen Inc is down 12% for the year on growth concerns over a multiple sclerosis drug. Shares were also hammered after the firm announced a significant guidance cut earlier in the year. But Jim Cramer believes the company is addressing those issues, which along with a number of potential positive catalysts should send the stock higher in 2016.
Celgene Corporation has been flat for most part of the year. But shares suddenly saw a surge in investor interest and soared 10% on Wednesday. Analysts attribute the recent jump to news that the firm settled a patent dispute related to its blockbuster blood cancer drug. Cramer expects the current growth starved investment environment to force institutional money to seriously consider the stock.
Gilead is a Value Play; Regeneron a Growth Bet
Gilead Sciences, Inc. has been most representative of the way biotech stocks performed this year. Shares shot up during the first part of the year thanks to its Hepatitis C drugs. The rally tapered sometime during June, and Gilead has been locked in a range ever since. Jim Cramer considers Gilead a tremendous value play. The stock sells for just 8.5 times next year’s consensus earnings.
Last on the list is Regeneron, the fastest grower of the group. The stock is up 36% year to date. Cramer acknowledges it’s a lot more expensive than its peers. But the growth story remains intact, which should lead to some significant upside in Regeneron Pharmaceuticals Inc .