"So, large-cap biotechs have done well this year," he said. "We went back and actually analyzed what's driven that outperformance. Interestingly, the majority of the outperformance has been driven by new-product introductions and earnings upside because of leverage down to P&L.

"The multiple has actually contracted, which I think is kind of counterintuitive to what the public believes."

Read More3 top biotech stocks with big upside: Pro

Over the next year or two, the large-cap biotech sector is likely to see "robust data flow, new clinical data announcements, continued momentum in terms of the blockbuster product launches and the P&L leverage to drive earnings," Chai added.

"And in a way, we can envision a scenario where now sentiment, which we define as sort of the multiple, can catch up to fundamentals."

Chai said that his top three health-care stock picks are: Medtronic, which should do well regardless of how its proposed tax-inversion deal with Covidien turns out; pharmaceutical company Sanofi, and Tornier, a medical-device manufacturer that should benefit from a variety of factors, including recent restructuring and potential consolidation.

Originally posted here:

These 3 hot health-care stocks look strong: Pro