Best Health Care Stocks for June 2024

What you need to know about the healthcare sector

Healthcare has been one of the sectors most impacted during the COVID-19 pandemic, resulting in major changes in insurance, availability of in-person care, demand for new products, and more. Fortunately, the sector is recovering quickly. Major issues currently impacting the sector include an increase in the number of people who are both Medicaid and Medicare eligible, rapid advances in technology that are impacting healthcare service and delivery operations, and an increased focus on specialty pharmacy.

One important trend to watch is the rapid growth of weight-loss drugs like Ozempic. With an estimated 500 million adults worldwide being obese, the market for weight-loss drugs is huge. Major suppliers of weight-loss drugs, such as Novo Nordisk A/S (NVO) and Eli Lilly (LLY), are already benefiting from increased investment, but many other healthcare companies stand to benefit as well.

The healthcare profit pool is expected to grow at a compound annual growth rate (CAGR) of 7% through 2027, increasing from $583 billion in 2022 to $819 billion.

How we picked the best healthcare stocks

In selecting the best healthcare stocks, we considered several factors: Our search included only companies listed on the Nasdaq or New York Stock Exchange with stock prices of more than $5 per share, daily trading volumes of more than 100,000, and market capitalizations of more than $300 million. From this subset of healthcare stocks, we ranked the companies with the highest 30-day percentage returns.

Note that while price-to-earnings ratios are typically included in our screens, all of the companies in the top 10 based on 30-day returns do not have P/E ratios, often because they either had no earnings or incurred losses during the relevant period.

Pros and Cons of Healthcare Stocks

One key advantage of the healthcare sector is that demand is stable. Overall demand for healthcare-related products and services is likely to remain stable or increase over time, especially as the population ages. For example, due to the aging baby boomer population, the Centers for Medicare and Medicaid Services projects that national healthcare spending will reach $6.8 trillion by 2030.

Another key benefit of healthcare stocks is that companies have a strong incentive to continue developing and leveraging new technologies to compete with others in the industry and to improve the quality and affordability of care for patients. This means that healthcare stocks often offer both short-term and long-term growth opportunities.

A third benefit of healthcare is that promising clinical trials or the launch of a new drug with great potential usually result in big increases in the stock prices of individual companies, and investors may be able to profit from these big gains.

However, investing in healthcare stocks also comes with risks. As mentioned above, healthcare is a huge and very complex sector, and investors may feel uneasy about investing in healthcare stocks for the first time. Additionally, legislation can play a large role in this industry, adding to the unpredictability. Finally, for those without industry expertise, it is nearly impossible to predict which companies will be hugely successful with new healthcare products and services.

There are great opportunities for profit in the healthcare sector, but it’s important to remember that no one can predict what a stock’s price will do, and past performance is no guarantee of future results.

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At the time of writing, the author does not hold any positions in any of the securities mentioned.