Investors looking beyond artificial intelligence (AI) should closely watch two healthcare names – Thermo Fisher Scientific (TMO) and Waters (WAT) – according to Josh Brown.
In his latest report, the Ritholtz’ chief executive highlighted laboratory equipment suppliers whose improving businesses are attracting buyers as tech stocks face pressure.
According to him, the opportunity is exposure to different earnings drivers, although both stocks have already rallied substantially.
Waters stock: a recovery with clear levels to watch
Waters offers exposure to spending on laboratory instruments, consumables and diagnostic tools – with a recent combination with BD’s Biosciences and Diagnostic Solutions businesses expanding its operations.
Q2 sales reached $1.645 billion, including $817 million from the acquired businesses.
Importantly, the legacy operation also strengthened: its $828 million in revenue represented 7% reported growth and 9% growth at constant exchange rates.
That distinction matters because the investment case extends beyond acquisition-driven expansion. Waters raised its full-year organic growth forecast to 7%-9% and adjusted earnings guidance to $14.55 per share.
Brown’s chart analysis suggests investors are recognizing that improvement.
Using Friday’s $437 close, he identified the record near $455 as the next hurdle, with the rising 50-day moving average around $421 providing nearby support.
At about 30x the midpoint of annual adjusted earnings guidance, however, Waters already carries meaningful expectations.
Further gains will likely require evidence that solid demand and acquisition integration can keep supporting earnings, rather than relying entirely on money rotating into healthcare.
Wall Street analysts currently have a consensus Overweight rating on Waters Corp.
Thermo Fisher: earnings will test the breakout
Thermo Fisher stock offers a broader route into the same investment theme, supplying laboratory equipment and consumables while also serving drugmakers through clinical research and pharma services.
Its latest results show why buyers have returned. Q2 sales went up 10% to $11.99 billion, including 5% organic growth, while adjusted earnings climbed 13% to $6.03 per share.
Adjusted operating margin expanded to 22.8%, signaling improving sales are translating into stronger profitability.
Brown highlighted a different technical setup here: Thermo Fisher had already broken above its early October high, reaching a record near $703 before finishing Friday around $690.
He viewed the recovery in momentum following its pullback as supportive of another advance.
The immediate test is its October 21 earnings release.
A strong report could reinforce confidence that demand is catching up with the biotech stock’s advance; disappointing guidance could quickly challenge that optimism.
All in all, healthcare rotation may bring fresh buyers, but Thermo Fisher’s ability to sustain its breakout ultimately depends on delivering the growth those buyers now expect.
Note that Wall Street also currently rates TMO shares at Overweight on average, and they currently pay a small dividend yield of 0.28% as well.
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