Healthcare is catching the rotation out of AI. Josh Brown’s list includes two names that can benefit
(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — Money doesn’t leave the market. It moves, and the list is where we see it first. The Best Stocks in the Market list is built by the market, and this week the market is saying healthcare. My friend Adam Parker at Trivariate Research put out a note on Thursday asking what everyone means when they say they like the sector. Adam has been recommending healthcare for 21 months. By his own account, the call went from early to wrong to decent, and now some of his clients are calling it crowded. He doesn’t buy that. He argues the appeal comes from fast growth and upward estimate revisions, and he gives little weight to how cheap the sector looks against its own history. Adam also finds that parts of healthcare have low correlation to the companies riding AI revenue, which gives investors a different set of drivers. One of the fast-growth themes he singles out is life science and bioprocess tools, and it has beaten the rest of the sector this year. That’s the neighborhood two of today’s names live in. Waters (WAT) makes the instruments labs use to separate and identify molecules, and it’s new to this column. Thermo Fisher Scientific (TMO) is the largest company in life science tools. We nailed the call the last time we wrote about TMO last fall , so an update is long overdue. Sean’s got the usual Monday morning highlights from the list. I’ll be back with some technical commentary and risk management. As of Oct 19, there are 140 names on The Best Stocks in the Market list. Top sector ranking: Top industries: Top 5 best stocks by relative strength: Spotlight: Healthcare Sean — Healthcare is catching the rotation out of AI. Wednesday’s hotter-than-expected CPI print sent tech down 3% on the day, while healthcare was the best-performing S & P 500 sector, up 2.4%. It led again Thursday, up 1.8%. XLV gained 5.4% over the five sessions ended Oct. 15. To be clear, it’s not the only sector working. Through Oct. 14, energy (+51%) and tech (+32%) are the only sectors ahead of the S & P 500 this year. But healthcare is now third at +12.4%, within a point of the index (+12.9%) after a stretch of mid returns. The sector entered 2026 with its forward P/E relative to the market in the lowest quintile of its 15-year range. With this set up, we wanted to take a look at some charts within the sector. A pulse check on healthcare! Waters Corp. (WAT): Waters makes the instruments and consumables used to separate and identify molecules and the software that runs on its instruments. Its customers are mostly pharma and biotech, along with academic labs and food and environmental companies. In February, Waters closed a combination with BD’s Biosciences & Diagnostic Solutions business, which roughly doubled its revenue base. We haven’t written about WAT before. The stock fell 9% to 12% when the BD deal was announced in July 2025, then bottomed at $283 in mid-March, down 24.6% for 2026 at that point. It’s up 57% from that low to $444, about 2% below its record high of $454.54 set Oct. 6. Waters reported Q2 earnings on Aug. 4th with revenue of $1.65 billion and adjusted EPS of $3.05, both topping expectations. The legacy WAT business did $828M, up 9% and the new BD unit did $817 million, up 4% in its first full quarter. Management raised full-year organic constant-currency growth to 7%-9% and adjusted EPS to $14.45-$14.65 (+10-12%). WAT guided Q3 to $1.75 billion-$1.762 billion in revenue and $3.95-$4.05 in EPS. WAT trades at about 30x the midpoint of 2026 EPS guidance and reports again on Nov. 3. Risk management: Josh — Waters ripped out of a spring base in late May, and the Aug. 4th earnings report Sean described above lifted it again. The stock ran roughly $40 in a single session on about double its usual volume. Dips since have found buyers near $390. A September breakout carried it to a record near $455 on Oct. 6, and it has chopped between $422 and $450 since. Friday’s close was $437, with the 50-day rising at $421 and the 200-day at $366. The $455 high is the level to clear. With RSI at 56, momentum is sitting in the middle of its range after a full lap. It ran up to 70 at the end of September on the way to the record, cooled to the mid-40s by Oct. 2, and has bounced between there and the low 60s while price stayed within a few percent of the high. That’s a base for another try at the record. Traders can use $420 as a good enough stop. I’d use closing prices. Those are the early October lows, and the rising 50-day at $421 lands in the same spot. That’s not an accident. A close below it and the range has broken to the downside. It’s a tight leash, and that’s the point. Investors can anchor to $390. The August 6th low and the September low both came in right there, two tests of the same spot, with the 200-day at $366 sitting well underneath. A weekly close below $390 and the uptrend has failed. Thermo Fisher Scientific, Inc. (TMO): Sean — Thermo Fisher is the largest company in life science tools, with about $46 billion in trailing revenue. It sells analytical instruments, lab consumables, diagnostics and bioproduction equipment. It also runs the pharma services and clinical research business that drug developers outsource trials to. Pharma and biotech are about 60% of revenue. We last mentioned TMO on Nov. 24, when Josh showed the chart pressing against its highs at a $220 billion market cap and said, “gun to my head, it’s gonna go.” It went! The stock is up 19% since then and closed Thursday at a record $696.49, a $257.5B market cap. That’s 60% above its 52-week low of $435.27, 20.5% year to date and 31% since mid-July, right before it reported Q2 earnings. Five analysts raised price targets in the last two weeks, with JPMorgan and TD Cowen both at $760. Guggenheim initiated at buy with a $740 target on Thursday. TMO reported its Q2 report in July with revenue of $11.99 billion (+10%, 5% organic) and adjusted EPS of $6.03 (+13%), and adjusted operating margin up 0.9 points to 22.8%. Management raised full-year revenue guidance to $47.4 billion-$48.1 billion and adjusted EPS to $24.93-$25.33 (+9%-11%). It guided free cash flow to $6.9 billion-$7.4 billion and a planned $4 billion in buybacks. The company has also closed the Clario and Solventum filtration acquisitions, and sold its microbiology business for $1.075B in August. At a September conference, management said orders are running ahead of revenue, and the stock rose 4.6% that day. There is a lot of momentum in this name from management, analysts, and price. TMO trades at about 25.6x forward earnings and reports Q3 this Wednesday, Oct. 21, before the open. Consensus is $6.40 in EPS on $11.91 billion in revenue. Risk management: Josh — Thermo Fisher gapped out of a long base on July 23, opening near $570 after closing in the $520s the day before. The Q2 report Sean described above is the reason. That’s a breakaway gap, and it has stayed open for three months. The stock hasn’t been back below $555 since. It ran to $645 by late August, pulled back to $597 in early September, and reached a high near $693 on Oct. 6 that reversed hard. After a week of digestion it took that high out on Thursday and printed a record near $703. Friday’s close was $690, with the 50-day rising at $637 and the 200-day at $547. Thursday’s high is the level to clear. RSI is 64. It ran up to 70 in late September, washed out to the mid-40s on the early October pullback, and is back at 64 with the stock at a record. The stock gave back about 7% to do it. Momentum is fully rested and the price is already at new highs. Traders can use $650 as their stop. That’s the bottom of the late September and early October range, where the stock kept finding buyers before this week’s breakout. A close below it puts the stock back inside the box and says the breakout didn’t take. The chart will let you know in short order, and with the Q3 report due Wednesday morning, it may not take long. Judge it on the close, not the intraday swings. Investors can anchor to $600, the early September low and the base of the run since the August high. The gap sits far below that, and the 200-day is too distant to act on. A weekly close below $600 and the uptrend that began with the July gap has lost its footing. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. 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