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Medical device companies get scant Wall Street love

On Monday, Morgan Stanley health analysts picked five healthcare stocks that they believe investors should own now. Notably, only one is a medical device firm.

The stocks that they advised investors to buy now are CareFusion (NYSE:CFN), the California medical device company; Coventry Health Care (NYSE:CVH), the Maryland managed healthcare company; UnitedHealth Group (NYSE:UNH), the Minnesota insurance giant; Pfizer (NYSE:PFE), the New Jersey drugmaker; and Express Scripts (NASDAQ:ESRX), the Missouri pharmacy benefit management company.

These stocks were “particularly well positioned to outperform over the next 12 to 18 months,” according to those analysts. That’s because they met key criteria that they were looking for — “clear fundamental growth trajectory, limited exposure to debt ceiling bill related spending cuts, attractive valuation and free cash flow yield and strong upside” to the analysts’s price targets.

t’s interesting that only one medical device firm was selected in this group. In fact, medical device companies aren’t getting a lot of love from Wall Street. Last week, the Wall Street Journal reported that Goldman Sachs favored the medical supplies industry over the medical device industry.

“The biggest challenge for (the medical device) industry is top-line growth,” said David Roman, vice president of medical technology research at Goldman Sachs. “The growth profile for the supply guys is less risky, higher growth rate at the same price.”

And the company ended up downgrading the stocks of both Medtronic (NYSE:MDT) and Zimmer (NYSE:ZMH)

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