Our estimates are based on past market performance, and past performance is not a guarantee of future performance. Still, analysts’ consensus price target of $81.47 represents expected upside of more than 18% for BMY stock over the next 12 months or so. For example, drug sales in 2022 were hurt by lower sales of Januvia and Janumet for the treatment of Type 2 diabetes, due to competition from generic drugs in Europe. A key metric for BofA is free cash flow yield − or a company’s free cash flow divided by its enterprise value. “Free cash flow yield might be the best measure of the quality of a company,” Woodard wrote in his research note.

“Profitability tends to rise with time during that retention period, so maintaining those relationships is especially important to Humana,” Utterback said. Waltham, Mass.-based Thermo Fisher Scientific Inc. manufactures scientific equipment, instruments and software used in medical research and development as well as reagents https://bigbostrade.com/ 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. However, the firm was bought back at government auction in 1919 for $3.5 million by George Merck, a member of the Merck family, with help from Goldman Sachs and Lehman Brothers.

• The company is a large developer of pharmaceuticals and medical devices, including tests.
• Additionally, with the FDA reportedly set to clear updated COVID shots as early as Friday, significant upcoming catalysts can aid in the recovery of the stock.
• Some P/E ratios are backward-looking, or reflecting earnings from a previous period (typically the past 12 months).
• The approach of the First Trust Health Care AlphaDEX Fund (FXH, $102.95) is unique in that it takes an “enhanced” approach to exchange-traded funds.
• Health insurers and pharmacy benefit managers are sometimes collectively referred to as “payers,” as their role is to arrange payment for health care services.

And with its shares trading for just under $77 apiece, investors can grab one with $100. Exelixis’ expertise in developing cancer medicines should lead to key approvals, stronger revenue and earnings, and solid stock-market performance — and all that at a share price equivalent to a few cups of coffee. But with its above-average growth prospects and a dividend payout ratio positioned to be approximately 12% in 2023, the company’s payout growth profile could balance out the lower starting income. “Our large commitment to UMG required that we raise cash from the sale of one of our other investments. In light of the high quality of companies in our portfolio, this was a difficult decision to make. Ultimately, we chose to sell Agilent, as its current share price approached our conservative estimate of intrinsic value.

When you’re considering a new investment, in healthcare stocks or any other market sector, doing your due diligence is always the first step. While the large-cap stocks listed above can be very safe bets, more volatile small-cap biotech stocks can be incredibly risky investments. Abbott Labs was founded in 1888 and is headquartered outside of Chicago, Ill. The company is a large developer of pharmaceuticals and medical devices, including tests. Abbott is perhaps best known for some of its more innocuous consumables, such as PediaSure, Pedialyte and Similac. But, like other healthcare companies responding to the pandemic, it also has a Covid-19 test.

The biotech should start two more late-stage trials for the drug in the fourth quarter of 2023 and the first quarter of 2024. It will test Sunosi as a therapy for binge eating disorder, and for shift work disorder (a sleep disorder that sometimes affects those who work at night or non-traditional working hours). Auvelity is currently being investigated as a therapy for agitation in Alzheimer’s disease; it’s undergoing a second phase 3 clinical trial along those lines, having aced the first.

How to buy health care stocks

Merck (MRK, $106.24) is one of the largest pharmaceutical companies in the world. It develops and markets prescription medicines, vaccines and biologic therapies, as well as animal health and consumer care products. Currently, healthcare is an “inexpensive, defensive sector” whose secular growth is the second fastest since 1986, according to a recent report from BofA Global Research. The sector has “strong fundamentals” and corporate ESG focus could drive additional healthcare spending, the report said.

In addition to being affordable healthcare investments, these under-the-radar companies present an opportunity for significant returns. But betting too much on an individual stock can be risky — and buying several individual health care stocks can be expensive. Individual stock-pickers also need to research stocks before buying, which can be time consuming. Below is a list of nine of the best-performing health care stocks in the S&P 500, ordered by one-year performance. Others, such as Tenet Healthcare, are operators that hire and manage doctors, nurses and technicians to provide health care services to patients. The health care sector is the largest employer in the U.S. — and that’s not expected to change anytime soon.

This revelation could revolutionize the way physicians treat patients with complex coronary artery disease. What really deserves recognition is their organic growth, which soared to an impressive 11.5% in their core business. This success can be attributed to the excellent performance of its Medical Devices, Established Pharmaceuticals, and Nutrition divisions. Also, as more health problems pop up around the world, these big companies are working together more, sharing what they know and have. This means that in the future, medicine won’t just be about getting better when you’re sick, but also about stopping illness before it starts and keeping the whole person healthy.

Bristol-Myers Squibb Company (NYSE:BMY)

But if you have a 401(k), you’ll likely instead have to look into mutual funds that focus on the healthcare industry, rather than individual stocks. To acknowledge this international nature of healthcare, many investors find the iShares Global Healthcare ETF (IXJ, $85.49) a preferable alternative to the earlier funds that are only focused on American companies. IXJ is indeed biased toward the U.S., with more than 70% of the fund focused on domestic names. However, it also has a healthy dose of international stocks from developed markets like Switzerland, Japan and the United Kingdom. This leaves the fund with 70 of the largest healthcare stocks on Wall Street, including insurance giant UnitedHealth Group (UNH), industry icon Johnson & Johnson (JNJ) and Big Pharma mainstay Eli Lilly (LLY). Like many other industries, the healthcare sector underwent significant changes due to the COVID-19 pandemic.

These are less swayed by the individual ups and downs of any one company but provide solid, steady long-term growth. If you have a regular brokerage account, you can easily add healthcare stocks to your taxable investment portfolio. If you don’t already, check out our listing of the best online brokerage accounts to get started.

What to look for in healthcare stocks

We have assessed the hedge fund sentiment from Insider Monkey’s database of 895 elite hedge funds tracked as of the end of the second quarter of 2022. The companies that operate in the healthcare sector were selected for the list. In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks are also discussed. Data from around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.

To help you cut through the noise in your research, these are the 10 top healthcare stocks by market capitalization. They just reported impressive second-quarter results, with revenues of $11.2 billion. The company experienced 4% revenue growth in both existing product lines and its pipeline of new products, making significant progress in its pipeline. Several regulatory and clinical milestones were achieved, reaffirming its commitment to long-term growth. However, if you’re more interested in start-ups developing next generation cures than the old guard in this sector, consider XBI as one of the best healthcare ETFs to invest in. An added bonus for many investors is that it has almost no overlap with core holdings in the S&P 500, so you can layer it into your portfolio without redundancy.

We believe everyone should be able to make financial decisions with confidence. Moderna also is working on a vaccine for propionic acidemia, which is the body’s inability to process certain parts of proteins and fats properly. Other drugs in the pipeline include one for heart failure and another for cystic fibrosis, the latter in collaboration with Vertex Pharmaceuticals (VRTX). The company also consistently increased its free cash flow, from $12.8 billion in 2019 to $24.3 billion in 2022. AbbVie’s acquisition of Allergan in 2020 further diversifies its business. Bristol-Myers claims that its partnerships have brought “significant commercial success and pipeline growth,” with 12 of its 20 blockbuster drugs coming from such collaborations.

As defensive stocks, healthcare companies provide steady returns in any market. Because people will always need healthcare, the healthcare sector provides very steady, consistent returns that are uncorrelated with the overall direction of the stock market. When we take a look at the broader healthcare sector, it becomes clear that the two subsegments mentioned above will outpace the industry in terms of growth. A research report from Market.us estimates that the consumer healthcare industry was worth a whopping $359 billion in 2022 and will grow at an 8.7% CAGR to be worth an estimated $827 billion by the end of 2032. The research firm believes that growth in diseases such as heart problems will spur the demand for over the counter medicines and stimulate the sector. It adds that growth in awareness about healthy living combined with the fact that more prescription free products will drive consumer spending.

In addition, drugmakers and medical device makers must convince payers, including health insurers, PBMs, and government agencies, to buy their products. If companies aren’t successful in obtaining reimbursement approvals, their growth prospects can be reduced. Another important gauge of financial strength is the free cash flow (FCF) generated by a company. FCF is the cash left over after operating expenses and capital expenditures (which includes money spent on buildings, equipment, and land). As with the cash position, the higher a company’s FCF, the stronger its financial position. Novo Nordisk’s Ozempic and Wegovy are GLP-1 drugs, which mimic a particular hormone in the brain to reduce appetite.

Types of Healthcare Stocks

They had been mismanaged prior to the company spinning off its biopharmaceutical business in 2015 which had generated most of Baxter’s operating profit. With a new CEO in Joe Almeida, who came with a successful track record leading another medical device company (Covidien) we identified three sources of value latency for the new standalone Baxter. If you want to read about some more healthcare stocks, go directly to Top 5 Healthcare Stocks to Buy. Investing in any kind of stock comes with risks, including the possibility that competitors will develop more successful products and services. Healthcare stocks face these risks, as well as others that are more unique to the sector. 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.

Considering the stock’s forward P/E is just 19, that’s a reasonable valuation considering its expected growth, working out to a PEG ratio of just 1.5. The recent FDA approval of the da Vinci gold mining stocks SP system for simple prostatectomies solidifies its role as a revolutionary force in the healthcare industry. Despite this, the company’s stock experienced a 5% drop after-hours trading.

In essence, the core businesses were highly durable, providing life sustaining or saving medical products such as IV medication or pumps and dialysis machines. Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

They’re also working together to develop therapies targeting type 1 diabetes. And, when there’s something everyone needs, there’s a huge opportunity for investors. 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. With that in mind, it’s no wonder that health care stocks have outperformed the S&P 500 index over the past five years.

Its global operations provide health and dental benefits, as well as hospital and clinical services in South America. Like many other companies on our list, Danaher’s operations are vast and diverse. The company operates primarily in environmental sciences, diagnostics and life sciences.

These include vaccines against respiratory syncytial virus (RSV), seasonal flu, and cytomegalovirus, which is the leading cause of birth defects in the U.S. The best healthcare stocks should be on the radar of any investor who is looking to hedge their holdings in today’s volatile markets. The best healthcare stocks offer investors a defensive hedge in an uncertain market.

Global demographic trends point to an expanding senior citizen population, suggesting significant growth potential in the health insurance industry. Market research firm Global Market Insights predicts the global health insurance market will compound by 5.5% annually for the next decade, going from $3 trillion in 2022 to surpass $5 trillion by 2032. But one of Wall Street’s best healthcare stocks is ramping up its research and development efforts to find new drugs and offset those lost to patent expiration. These include a Keytruda-related lung cancer drug, a melanoma drug co-developed with Moderna (MRNA), and other pharmaceuticals.

Morningstar analyst Debbie Wang said AMN’s ability to provide “almost any type of medical worker” appeals to its customers as they can use one vendor for all their medical hiring needs. “These managed services relationships have been a major focus for AMN Healthcare, and the firm has become one of the premier HR managed services providers as a result.” Humira accounted for 37% of total revenues in 2022, making AbbVie vulnerable to rising competition. However, the company has a strong pipeline of drugs in development such as Skyrizi for inflammation, Rinvoq for Crohn’s disease and Imbruvica for cancer. The top healthcare stock earned 4 out of 5 stars from the analyst, with a fair value of $550. 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.

Read the investor presentations on companies’ websites to learn their strategies for growth and the size of their potential markets. Check out the companies’ rivals to see if their strategies seem to be as good or better. Note that companies will often mention specific competitors by name in their 10-K annual regulatory filings to the U.S. Pfizer’s existing business is also growing; management is guiding for between 6% and 8% in revenue growth for non-COVID-19 products in 2023. The stock’s forward P/E is just 10 right now, so this could be an excellent opportunity to scoop up Pfizer for when growth returns. An endless need for better treatments and cures demands innovation and growth, which isn’t a bad place to find long-term winners you can stick in a diversified portfolio.

The global healthcare sector is expected to experience a shortage of 12.1 million skilled healthcare professionals by 2035. Experts think an active adoption of technology and virtual delivery systems can help overcome such a significant shortage of healthcare professionals in the near future. Instead, consider purchasing exchange-traded funds (ETFs) or index funds that track diversified indexes focused on the healthcare sector.