The U.S.’s largest employer is the healthcare industry, with its healthcare stocks being one of the largest in the world and that situation is not likely to change anytime soon. The Centers for Medicare and Medicaid Services estimate that healthcare spending represented 18% of the country’s GDP in 2021, the most recent year for which data are available, and that figure is predicted to rise to even higher levels by 2030. Given this, it is not surprising that, over the past five years, healthcare stocks have outperformed the S&P 500 index.
This article, therefore, is a detailed guide to give you a vivid review of everything that has to do with healthcare stocks and their advantages.
What Are Healthcare Stocks?
Healthcare stocks are stocks of listed businesses that offer us goods and services that keep us healthy. They can be divided into a few distinct industries, including:
#1. Healthcare Facilities and Operators
Healthcare stocks involve companies that own or operate hospitals, other healthcare facilities, and provider organizations. Additionally, others are operators that employ and oversee physicians, nurses, and technicians to provide patients with healthcare services.
#2. Biotechnology and Pharmaceuticals
Drugs are created by the biotechnology and pharmaceutical industries. Pharmaceuticals are made from chemicals, whereas biotechnology is created using living organisms, so technically, the two are not the same. However, the terms “biotech” and “pharma” are largely interchangeable in the context of investing.
Different Types Of Healthcare Stocks
There are many different types of healthcare stocks because the healthcare industry is so diverse. The four most significant types are:
#1. Drug stocks:
Drugmakers focus on developing drugs that treat or prevent diseases, with biotech companies using live organisms and pharmaceutical companies using chemicals. Note that drug stocks range from large to small.
#2. Medical device stocks:
Devices used in patient care are produced by medical device companies. The equipment includes everything from disposable gloves and thermometers to robotic surgical systems and artificial heart valves. Furthermore, many health technology companies as well as manufacturers of medical equipment make up the medical device sector.
#3. Payer stocks:
Payers, such as pharmacy benefit managers (PBMs) and health insurers, have a significant impact on the American healthcare system. While PBMs manage prescription drug benefits for employers and health plans, insurers charge premiums to both individuals and employers to cover healthcare costs.
#4. Healthcare provider stocks:
In delivering healthcare to patients, healthcare providers are on the front lines. Note that hospitals, doctor’s offices, home health agencies, and long-term care facilities are among them.
Best Healthcare Stocks To Buy In 2023
#1. Vertex Pharmaceuticals
Vertex is a top biotech stock focused on developing drugs to treat cystic fibrosis (CF), a rare genetic disease that damages the lungs and other organs. Its newest drug, Trikafta, could increase the number of patients it can treat by 50%.
#2. Intuitive Surgical
Intuitive is a medical device stock with a Da Vinci robotic surgical system used in over 10 million procedures since 1999. The COVID-19 pandemic caused delays and a challenging supply chain environment, but the company looks to have growth opportunities due to an aging population.
#3. Novocure
Novocure is marketing a novel therapy called TTFields, which uses electrical fields to disrupt cancer cell division. It has been approved for treating glioblastoma and mesothelioma and is being evaluated in clinical studies targeting non-small cell lung cancer, ovarian cancer, brain metastases, and pancreatic cancer. Furthermore, these additional indications add up to a potential market that is 14 times larger than the one currently available to Novocure.
#4. UnitedHealth Group
They are recognized as the world’s biggest health insurers. It is a pioneer in healthcare delivery services and runs one of the largest PBMs. One of the most alluring payer stocks on the market is UnitedHealth Group due to the organization’s size, stability, and dividend. Additionally, with its upcoming acquisition of home health services provider LHC Group, UnitedHealth Group may also soon expand its presence in the healthcare provider market (NASDAQ: LHCG).
#5. Teladoc Health
Teladoc is a top telemedicine stock that provides healthcare through the Internet and over the phone. It acquired Livongo Health in 2020 to help people manage chronic conditions. The pandemic increased the adoption of virtual care services, but Teladoc’s growth slowed as life returned to normal. Fortunately, its post-pandemic prospects are still good, as its healthcare costs are still under control.
Best Healthcare Stocks With Dividends
#1. Premier, Inc.
Dividend Yield: 2.39%
Premier, Inc. is a North Carolina-based healthcare improvement company in the United States. The company primarily delivers medical and surgical products, pharmaceuticals, laboratory supplies, capital equipment, clinical engineering, and workforce solutions. Premier, Inc. (NASDAQ: PINC) declared a $0.21 per share quarterly dividend on October 21.
Additionally, the largest stake in the business, held by Renaissance Technologies, was 2.74 million shares worth over $90 million.
#2. Encompass Health Corporation
Dividend Yield: 1.10%
Encompass Health Corporation (NYSE: EHC) was founded in 1983 and provides facility-based and home-based post-acute healthcare services. It declared a quarterly dividend of $0.15 per share and is one of the best dividend stocks to buy now. Q3 results outperformed revenue but fell short of EBITDA.
#3. Baxter International Inc.
Dividend Yield: 2.11%
Baxter International Inc. is an Illinois-based company that develops healthcare products worldwide. The company offers dialysis therapies and services, and oncology drug platforms. The company’s Q3 non-GAAP EPS of $0.82 was in-line with analysts’ estimates. The revenue of over $3 billion climbed 18%, thereby outperforming market consensus by $30 million. They are one of the best dividend stocks to invest in.
#4. Patterson Companies, Inc.
Dividend Yield as of October 28: 3.90%
Patterson Companies, Inc. is a Minnesota-based company providing dental and animal health products in the US, UK, and Canada. It declared a $0.26 per share quarterly dividend and lowered its price target to $35. 20 hedge funds held stakes worth $167.70 million, with Ken Griffin’s Citadel Investment Group being the leading stakeholder.
Surely they are one of the best healthcare dividend stocks to monitor.
#5. Agilent Technologies, Inc.
Dividend Yield: 0.61%
Agilent Technologies, Inc. is a California-based company that offers application-focused solutions to the life sciences and applied chemical markets. It has an “outperform” rating and a $165 price target. 41 hedge funds are bullish on the company, with Impax Asset Management being the largest stakeholder.
What To Look For In Healthcare Stocks
How do you discover the best healthcare stocks to purchase?
Firstly, from the current price levels, we want to know if a stock will increase or decrease. The fair price of the stock is the best predictor of this. A stock has a good chance of increasing in the future if its fair price is lower than its current price.
Secondly, some of the top healthcare stocks distribute dividends, or a portion of profits, to shareholders. The overall return you get from owning a stock can be increased by dividends.
Additionally, the dividend yield and payout ratio of a stock measure how much of the company’s cash is being used to cover the dividend. The lower the payout ratio, the more likely the company is to keep paying dividends in the future.
What Are The Risks Of Investing In Healthcare Stocks?
Any stock investment involves risk, including the potential for rival companies to create more marketable goods and services. These dangers are present in healthcare stocks, along with others that are more particular to the industry.
Firstly, note that healthcare is highly regulated, so it’s important to pay attention to any FDA action related to medical stocks. This can have a major impact on a healthcare stock’s growth prospects.
Secondly, there is a high risk of litigation for many healthcare stocks. Patients may file lawsuits against healthcare organizations and medical device manufacturers, for instance, if they believe the company’s goods and services have harmed them.
In addition, pharmaceutical companies and manufacturers of medical equipment must persuade payers, such as government organizations, PBMs, and health insurers, to purchase their goods. If businesses are unsuccessful in getting reimbursement approvals, their chances of expanding may be diminished.
Lastly, Medicare will soon be able to negotiate prices with drugmakers, potentially negatively impacting drugmakers’ revenues and profits.
Is Healthcare A Good Sector To Invest In Now?
Yes, this is because the healthcare industry offers very steady, consistent returns that are unrelated to the general direction of the stock market. After all, people will always need healthcare. The American healthcare industry is expanding more quickly than the overall economy.
Is Healthcare A Good Investment For 2023?
Yes, it is, as healthcare stocks offer investors stability and profitability in both good and bad times, with healthcare hiring holding steady during recessions.
What Is The Best Stock To Make Money?
Signify Health Inc.: Governments, employers, health systems, health plans, and physicians who serve millions of people can take advantage of this company’s healthcare payment programs. The Medicare program run by the US government is one of its principal clients. Signify announced at the beginning of September that CVS Health would purchase it for about $8 billion. The deal is anticipated to be finalized in the first quarter of 2023.
Why Not To Invest In Healthcare?
Cons of healthcare stocks
#1. Political risk:
In 2022, about 8% of Americans will be uninsured. More than 35% of people had insufficient health insurance, which meant they couldn’t afford treatment even with it or had a coverage gap. In the most recent elections, universal health care has been a hot topic of debate. Some proposed reforms, like Medicare for All, would reshape the industry in a way that might hurt investors, for better or worse.
#2. Regulatory risk:
Regulatory actions can make or break a healthcare company, even in the current privatized U.S. healthcare system. Failure to receive FDA approval can spell disaster for an experimental biotech, pharmaceutical, or medical device company, and many hospitals rely on Medicare and Medicaid funding to stay open.
Do Healthcare Stocks Do Well In Recession?
Yes, healthcare stocks are stable during recessions due to their ability to pass on higher costs to customers during inflation, and they are receiving positive outlooks from analysts. Big pharmaceutical stocks perform well during recessions due to increased government spending, an aging population, and strong balance sheets.
Do Healthcare Stocks Do Well In Inflation?
Yes, healthcare businesses are quite resilient during inflationary times because they produce innovative products that cannot be replaced.
Is Johnson And Johnson A Good Stock To Buy?
Yes, it is, as Johnson & Johnson stock is cheap and pays an attractive dividend yield of 2.9%, making it a good pick for income investors. It has a value score of B and the potential to outperform the market, with a growth score of D.
Is Pfizer A Good Investment?
Yes, it is because Pfizer offers a good value due to its low P/E ratio and dividend yield of 4%, making it an attractive investment for income investors.
- DIVIDEND GROWTH STOCKS: High & Best Dividend Growth Stocks
- REAL ESTATE STOCKS: Residential, ETF & Cheap Stocks With Dividends
- OIL STOCKS: Top Companies, Prices & Best Stocks to Buy
- WHAT IS EBITDA IN FINANCE? Importance & How to Calculate It
- ASSISTIVE TECHNOLOGY: Definition, Types, and Benefits
References:
