As investors rotate away from artificial intelligence, healthcare stocks are emerging as a favored destination, according to Josh Brown, CEO of Ritholtz Wealth Management. In his latest commentary, Brown highlights two laboratory equipment suppliers—Thermo Fisher Scientific and Waters—as key beneficiaries of this shift.
Waters: A Turnaround Story
Waters, a maker of analytical instruments and consumables, has seen its shares rally as demand improves. In its most recent quarter, the company reported revenue of $1.645 billion, including $817 million from businesses acquired from Danaher. Excluding those acquisitions, organic revenue grew 7% year-over-year, with total reported growth of 9%.
The company raised its full-year organic growth guidance to 7%-9% and adjusted earnings per share to $14.55. Brown notes that the stock has broken above its October high, with the next resistance level around $455. The 50-day moving average, near $421, provides support.
However, at roughly 30 times forward earnings, the stock already reflects high expectations. Further gains will depend on the company's ability to sustain demand and integrate acquisitions effectively.
Thermo Fisher: A Broader Play
Thermo Fisher offers a more diversified exposure to laboratory equipment, consumables, and clinical research services. The company's second-quarter revenue rose 5% to $11.99 billion, with adjusted earnings per share up 13% to $6.03. Operating margins expanded to 22.8%, indicating improved profitability.
Brown highlights that Thermo Fisher's stock has also broken above its October high, trading near $690. The company's upcoming earnings release on October 21 will be a key test. If results disappoint, the stock could face selling pressure.
Both stocks have already rallied significantly, but Brown believes the rotation out of AI could continue to support healthcare names. Investors should monitor earnings and technical levels for signs of sustained momentum.
This article is for informational purposes only and does not constitute financial advice.
