One Stock You Need To Buy Now

Driven by the vicious bear market in Chinese stocks, U.S. stocks have suffered through a correction and heightened volatility this year. Against a backdrop of a relatively healthy U.S. economy, smart investors are using the correction as a buying opportunity for high-quality stocks that are suddenly — and unjustifiably — selling at bargain prices.

#-ad_banner-#Another way to approach stocks now is to focus on industries with the wind at their backs, regardless of what happens to the major stock indices on any given day, week or month. You wouldn’t know it from the financial headlines, but there are trends more long-lasting and powerful than the January Selloff of 2016. Like the snow piled high in the Northeast this week, the memory of this correction will eventually melt away. But the secular trends driving stocks in certain sectors higher will remain.

Healthy Profits In The Middle
The single most powerful and predictable long-term trend in the U.S. economy is the aging population. The Baby Boom population is moving into its senior years, with 10,000 Americans turning 65 every day. By 2030, more than 20% of the population will be over 65 years old and more than a third will be over 50. By 2050, the U.S. population aged 65 or older will be an estimated 84 million, vs. 43.1 million in 2012.

As I, and many others, have written before, businesses that sell products and services to older Americans will benefit from this unstoppable trend. These include all manner of healthcare companies, plus providers in the travel and leisure, real estate and many other sectors. But one area that’s certain to benefit is the pharmaceutical industry. Plus, drug makers are benefiting from another strong trend: the increasing use of drugs to treat chronic conditions. Combined with the aging population and longer lifespans, the market for pharma companies will experience strong growth for the next few decades.

The larger pharma companies have an edge in that their product portfolios and pipelines are diverse, and their financial strength allows them to invest billions in research and development, or acquisitions, that assure revenue and earnings growth. However, their very size is a liability when it comes to share price appreciation. For turbocharged growth, mid-cap pharmas offer a better opportunity because one or two clinical successes can lead to outsized gains. But unlike highly speculative small-cap pharmas, which often are wholly dependent on a single technology, mid-cap pharmas generally have some diversification that provides downside protection.

My favorite mid-cap pharma today is Jazz Pharmaceuticals (Nasdaq: JAZZ), which not only has one of the coolest ticker symbols in the market but has used cutting-edge biotechnology to carve out a growing market for its pharmaceutical products. Based in Ireland, Jazz specializes in hematology, oncology and sleep issues. It has grown in recent years through a merger with Azur Pharma in 2011, the purchase of EUSA Pharma in 2012 and, most notably, a $1 billion acquisition of Gentium in 2014.

Jazz’s biggest-selling drug is Xyrem, a treatment for narcolepsy with more than $800 million in annual sales. The company’s other two biggest drugs are Erwinaze, a $200 million drug which helps treat leukemia in patients who are allergic to other drugs, and Prialt, a $30 million treatment for severe, chronic pain. The Gentium deal brought with it Defirotide, which helps maintain liver function in transplant patients; the drug is approved in Europe and now under expedited FDA review for use in the United States.

Jazz’s revenue has grown from $872 million in 2013 to an expected $1.3 billion in 2015, and its net income has increased more than 57% during the past two years. Analysts expect continued strong growth as the narcolepsy-treatment market grows (it’s considered a significantly under-diagnosed malady), the FDA approves Defirotide, and other drugs proceed in clinical trials.

Note that Jazz is lauded for its innovative culture and management, and often cited as a potential buyout target by a larger pharma company. I wouldn’t be surprised to see this happen over the next year or two, with a significant boost for shareholders.

Risks To Consider: Jazz Pharmaceuticals’ stock would be hurt if the FDA denies the application for Defirotide prescriptions in the U.S. or if other drugs’ clinical trials go poorly
Action To Take: Buy Jazz Pharmaceuticals below $138.

P.S. If you go to the movies… the pharmacy… or even the grocery store, chances are the cash you’re spending is going right into the pocket of one little-known company. I’ll tell you all about this “invisible” firm — and why you should invest it in today — in my brand new financial report that you can access here.