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16 Best Healthcare Stock Picks to Buy: BofA’s Savita Subramanian

healthcare stocks to buy

Another way to get the benefit of investing in several health care stocks is through an exchange traded fund, or ETF — of which dozens are available. The first step to invest in health care stocks is to open a brokerage account if you haven’t already. When most people hear the term “health care,” the first thing that comes to mind is often a hospital.

  • A healthcare ETF offers a diversified portfolio of holdings in healthcare stocks.
  • Stryker is a leader in medical devices, present in virtually every well-equipped hospital or clinic on Earth, treating up to 130 million patients annually.
  • After all, solid healthcare services ranging from potent medicines to doctors are a pillar of well being.
  • Recessions are typically bad for discretionary stocks, this includes travel/tourism, retail, restaurants, leisure/hospitality, real estate, and manufacturing/warehouse.
  • While its diabetes business is likely stable for the next decade, innovative treatment could slowly endanger this market, especially for type-1 diabetes.
  • It currently has 38 ongoing Phase 1 clinical trials, 28 Phase 2 trials and 23 Phase 3 trials.

Medical supply companies, such as Patterson Companies, produce and distribute basic products that are used in day-to-day hospital work, such as latex gloves and antimicrobial cleaning supplies. For more information about these industries, check out our guide to biotech stocks. Some of these, such as Medical Properties Trust, are real estate investment trusts, or REITs, which own hospital buildings and lease them to operators. Health insurance is a necessity today, which means it’s a great addition to your portfolio. The makers of the medicines that keep us happy and healthy can be great places to invest.

Cons of health care stocks

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healthcare stocks to buy

A recent AHA report showed hospitals have experienced surging costs in items and resources required to care for patients since the start of the COVID-19 pandemic. This page shows information about the 50 largest medical stocks including UnitedHealth Group, Eli Lilly and Company, Johnson & Johnson, and Novo Nordisk A/S. Healthcare stocks fall under Morningstar’s defensive Super Sector, meaning they tend to do well even when the overall market is down. Understanding how pricing points are determined for a new product or service is essential to gauge a company’s earnings potential. Treatments for Alzheimer’s disease and cardiovascular disorders will help combat the physical and economic costs of demographic change.

Moderna (MRNA, $138.8) is a biotechnology company that burst into the public consciousness during the pandemic, known for its messenger RNA (mRNA) technology that enabled the rapid development of a COVID-19 vaccine. The company also believes that Epidiolex, its drug to treat pediatric onset epilepsy, has the potential to be a blockbuster. It is the first and thus far only FDA-approved prescription cannabidiol (from cannabis plants) for treatment of patients one year and older. Xyrem had comprised 76% of 2019 revenue of $2.2 billion, and that was down to about a third in 2022, with expected revenue of $3.6 billion to $3.7 billion.

Dividend Stocks With Strong Growth Prospects

She expects Humana revenues to grow around 10% compounded annually through 2027, earnings per share to increase 13% compounded annually and free cash flow to rise to $6 billion in the same timeframe. Humana (HUM, $495.02) is one of the largest health insurers in the U.S., with a special focus on serving the elderly, not surprising given its roots as a nursing home in the 1960s. It has a top-tier presence in Medicare Advantage plans, which is expected to grow as the baby boomer population ages. Amgen (AMGN, $231.66) is a biotechnology company that develops and markets prescription drugs for patients suffering from serious illnesses.

For example, biopharmaceutical companies, medical device makers, and healthcare providers can be sued if patients think the companies’ products and services have caused them harm. Some of the largest healthcare stocks include UnitedHealth Group UNH, Johnson & Johnson JNJ, and Eli Lilly LLY. The overall demand for healthcare products and services is likely to remain steady and to even increase as populations age. We initially compiled an extensive list of companies actively involved in the healthcare sector.

As the global economy returns to the new normal and the COVID-19 pandemic moves towards the endemic stage, the healthcare sector is adapting to new trends to shape its future outlook. One notable shift in the industry is the increasing virtualization of care, which has not only transformed the way healthcare services are delivered but has also attracted new players in the industry. For instance, in 2021, the Mayo Clinic and Kaiser Permanente jointly invested $110 million into Medically Home Group, a venture company focused on hospital-at-home services. During recessions, fundamentals become more important with investors paying closer attention to balance sheets, cash flows, and guidance. This helps explain why during recessions, many investors shun speculative growth stocks and instead focus their attention on blue chip healthcare stocks with strong balance sheets. That doesn’t mean healthcare stocks are recession-proof, but they are recession-resilient and tend to bounce back, minimizing losses more quickly.

Best Penny Stocks on Robinhood To Invest In for 2023

Despite the relatively strong showing of healthcare stocks, Morningstar equity analysts still see plenty of attractive opportunities for long-term investors. Policy decisions can make the difference between life and death, by determining which costs and treatments are covered. Around the world, healthcare systems are feeling the strain of rising costs, and workers are responsible for meeting more healthcare costs. At the same time, demand from emerging economies is growing, and spending is likely to increase amid efforts to upgrade the quality of healthcare. These trends will reshape price points for treatments, technology and services. For example, Mylan’s EpiPen is a popular product that can avert death in cases of extreme allergic reactions.

healthcare stocks to buy

If it isn’t, make sure you learn how it plans to achieve profitability and how quickly it expects to do so. Dock David Treece is a former licensed investment advisor and member of the FINRA Small Firm Advisory Board. His focus is on breaking down complex financial topics so readers can make informed decisions. Waltham, Mass.-based Thermo Fisher Scientific Inc. manufactures scientific equipment, instruments and software used in medical research and development as well as reagents and consumables. Merck was nationalized during World War I under the Trading with the Enemy Act of 1917—being an offshoot of a German company.

Healthcare Stocks With the Most Momentum

Let’s take a comprehensive look at how you may want to approach investing in health care stocks. If you’re curious about health care stocks in general, you can take a look at the health care index (SPXHC). Healthcare companies like hospitals and pharmaceuticals always operate in full swing. These stocks are not subjected to business cycles and can shield your assets when your other investments are going through a rough patch.

healthcare stocks to buy

Healthcare stocks belong to companies that develop pharmaceuticals, manufacture medical devices or provide medical care or health insurance. The company was founded by Dr. Thomas F. Frist, Jr in 1968 and is headquartered in Nashville, TN. Health care spending in the U.S. has seen consistent growth year after year. There is also an influx of new patients resulting from the Affordable Care Act to consider. More patients with insurance will make hospitals more profitable, making healthcare stocks a solid place for long-term investors. Another reason AMGN is on this list of best healthcare stocks is its promising pipeline of drugs, including Repatha for cardiovascular disease, Lumakras for colorectal cancer and asthma drug Tezspire.

Switching Costs Aid Medical Device and Diagnostic Industries

“We also see some uncertainty around efforts to treat more ESRD patients at home. Positively, the need for dialysis clinics will not evaporate in that scenario since at-home patients need to be trained and monitored even if they don’t receive treatment in the clinic. However, we recognize that one of the firm’s major intangible assets (convenient locations) may become less important, which could eventually affect profitability.

The lower the payout ratio, the greater the likelihood that the company will be able to keep paying dividends in the future. Like many other healthcare companies, Thermo Fisher has jumped into the Covid-19 business. The company already offers a test that it says can detect the new omicron variant, making it presently the only FDA-authorized test capable of detecting the variant.

How to Buy Healthcare Stocks

These are the healthcare stocks that had the highest total return over the past 12 months. Some health care ETFs, such as the Health Care SPDR Select Sector Fund, are sector-wide ETFs that include companies from all of the industries discussed above. Just because a stock’s P/E ratio is higher than those of its peers doesn’t mean it’s a good or bad buy. It could indicate that the company’s growth prospects are much better than those of its rivals. Be sure to also check out the stock’s price-to-earnings-to-growth (PEG) ratio, which incorporates projected earnings growth rates (typically over five years).

Inc, Pfizer, Abbott Laboratories, Medtronic PLC, Vertex Pharmaceuticals, Boston Scientific Corp., HCA Healthcare Inc., etc. Experts predict that healthcare stocks will increase 6% annually until at least 2025, so it is a good idea to invest in healthcare. The most undervalued healthcare stock is Ionis Pharmaceutical, trading at a 42% discount to the fair value estimate set by Morningstar analysts.

Healthcare is everything, and post-pandemic, the demand for healthcare products and services has become of utmost importance. More people are seeking quality healthcare, making the healthcare industry an excellent long-term opportunity for investors. Health care has been known as one of the best defensive sectors because they have typically been unchanged due to economic demands. Investing effectively in healthcare stocks requires a unique set of skills. Abbott Labs was founded in 1888 and is headquartered outside of Chicago, Ill.

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