Top Stocks to Buy Now That the 21st Century Cures Act Has Passed

Now that Washington has signed off on the 21st Century Cures Act, deregulation, streamlining, and billions of additional research dollars could cause healthcare stocks to pop. Do you own the stocks most likely to benefit?

In this clip from The Motley Fool's Industry Focus: Healthcarepodcast, analyst Kristine Harjes and contributor Todd Campbell share the stocks they think are poised to benefit most from the Cures Act. On their list are top medical device stocks, such as Medtronic (NYSE: MDT), and drugmakers, such as Biogen Inc. (NASDAQ: BIIB), Johnson & Johnson (NYSE: JNJ), and BioMarin (NASDAQ: BMRN). Tune in to learn out more about these stocks and whether they're right for your portfolio.

A full transcript follows the video.

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Kristine Harjes: The next segment of our show is inspired by a listener question that came in through Twitter. Ifyou guys aren't already following us, our handle is @MFIndustryFocus. This question comes from Harris Arshad. He asks us, if we were to create our own ETF based on the 21st Century Cures Act, what would be included?There's some backgroundnecessary before we dive in and actually answer this question. Todd,do you want to give an elevator pitch?We probably need to describe both the Cures Act really quickly, and also what an ETF is.

Todd Campbell:I'll start with the Cures Act. We'll keep it very high level here. The Cures Act waspassed by Congress and signed by the president. What it's designed to do is to reduce theregulatory burden on drug and medical device discovery and development, to increase the speed of reviewing those products that have been researched through the FDA, and to get them into patients' hands more quickly. So, they're doing that through a lot of various different carrots, including billions of dollars ofadditional spending that they're going to besending to both the National Institute of Health and the FDA.

Harjes:Andif you're curious about more, we did an entire half of an episodeon the 7th of December. If you missed that episode, be sure to go back and check it out. Meanwhile,the second piece of background necessary for answering this question is: What is an ETF? An ETF is an exchange-traded fund. It'sessentially a basket of stocks that trade for a single price. It'skind of similar to a mutual fund,but instead of having its value determined by the underlying assets once per day like a mutual fund does, an ETF is traded like a common stock, so its price will go up and down throughout the day. Basically,all you need to know if you're notsuper familiar with ETFs is,it's a handful of stocks that we're looking at here.

Campbell:Right. We haveplenty of coverage on The Motley Fool's website ifanybody is interested in looking more into different ETFs. It was a fascinating question to me,and it really got me thinking aboutwho's going to benefit most, potentially, from the Cures Act.

Harjes:Yeah,absolutely. For me, the first one that came to mind were drugmakers.I'm not going to pick every single drugmaker, but I would pick a couple of them to throw into this basket. One thatI would throw out there isBioMarin. This is a company that's focused on rare-disease drugs. One of the things that came up in the Cures Act is that now, the FDA isallowed to consider real-world evidenceabout a drug's efficacy. So, outside of trials, do we see this drug working? And that could lead toexpedited approval, especially for patients with an unmet need. So, yourpatients that are looking at receiving rare-disease drugs. So,I could definitely see them benefiting from this act.

Campbell:Itotally agree with you. I'm actually going to cheat withone name that I would like to include in there. It's going to be an ETF of ETFs. I thinkpeople should look at the medical deviceETF, theiShares Medical Device ETF-- symbol is IHI -- and that's becauseone of the most vocal lobbyists involved in creating this act was the medical device lobby. There are lots of different things in this act that help to increaseeverything from breakthrough designationto the ability to use new devices in more rare diseases. There's a lot of goodies in this act that could help prop upmedical device stocks. If youwanted one in particular, I guessMedtronicis kind of the grand-daddy of medical devices.

Harjes:If you think we're cheating by choosing the IHI, then the biggest holding -- this is a guess, but I think it's a pretty strong guess -- is Medtronic.

Campbell:It is. Medtronic is No. 1 at 12%.Abbott Labsat7.7%, andThermo Fisherat 7.7%.

Harjes:Yeah,that sounds right. So at Medtronic,they make cardiac devices,diabetes devices, and more. They're a huge company. They'revery diversified. They're a Dividend Aristocrat. If you'reonly looking for one medical device company,that would be my pick.

Campbell:Yep. Andif you want to go with a bigger basket, just go with the IHI.

Harjes:Indeed. Another company that I'll throw into our broader ETF isJohnson & Johnson. That's because it has devices and it also has drugs, so you're getting two for one there.

Campbell:Yeah, that's a good pick, and it's a Goliathwithin both of those areas. I guess I would toss in the ringBiogen, because Biogen is doing atremendous amount of research and development onneurodegenerative diseaseslike Alzheimer's and Parkinson's disease. Specifically in the Act,there's a lot of money that's being set aside for the BrainInitiative, and also for the Precision Medicine Initiative,both of which could increase the number of drugs that end up in the clinictargeting cognitive decline.

Harjes:Right. There'sa lot of money in here going toward those initiatives, which aretrying to harness the power of datato create personalized treatments. Basically, whatprecision medicine is doing istaking into account the individual variability in your environment and your lifestyle and your genes. You can even see there some genetic companies getting into the mix. Maybe something like anIlluminathat does gene sequencing.

Campbell:Absolutely. And they're sayingone of the biggest advances, potentially, in Alzheimer's research could come from deepsequencing,which is something relatively new. We have finally gotten the technology now to really dive even deeper than we ever have before into the genome. Perhaps, in doing that, we'll find some more of these common threads that connectdifferent patientswho are suffering from this devastating disease.

Kristine Harjes owns shares of Johnson and Johnson. Todd Campbell has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Biogen and Illumina. The Motley Fool owns shares of Medtronic. The Motley Fool recommends BioMarin Pharmaceutical and Johnson and Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.