Posted on Thursday, March 17th, 2022 by MarketBeat Staff
This is a tough time to be an investor. However, investors of every age need quickly learn that sell-offs, corrections, even bear markets are a normal part of the investing cycle. Even in down markets, there are stocks that are outperforming the broader market. One place to look is defensive stocks. These are stocks that tend to be solid performers regardless of how the broader market is moving.
One such sector is health care. From medicine to insurance to medical devices, this is a fertile sector for investors looking for growth. The world continues to age. That means that demand for health care and related services will only increase in the years and decades to come.
So if you're ready to take some money off the sidelines, or if you're just looking for a few stocks to add to your watchlist, we've taken the time to analyze a range of health care stocks for you to consider.
Here are seven health care stocks that you should be considering right now.
#1 - Moderna (NASDAQ:MRNA)
Moderna (NASDAQ:MRNA) is first on this list of health care stocks to buy. And it’s not because the company is likely to continue to generate significant revenue from its Covid-19 vaccine. In fact, the company recently announced it would be building its first vaccine facility in Africa.
However, what the vaccine has done is to shed a light on the company’s work with messenger ribonucleic acid (mRNA). Moderna’s ultimate objective is to develop a series of transformative medicines based on mRNA. And the company has a manufacturing plant that will allow it to produce at scale.
MRNA stock is up 8% in the last 12 months. However, it’s down 65% from its 52-week high, and right now the stock appears to be undervalued with strong long-term growth prospects. The stock does not have a high short interest ratio. However, a significant number of investors appear to be shorting the stock. Much of this has to do with ongoing concern about the safety of its Covid-19 vaccine. On the other hand, institutional ownership continues to increase, albeit at a slower pace.
And while MRNA stock does not look oversold from a technical level, analysts give the stock a consensus price target of $235.15, which is a 38% upside.
About Moderna
Moderna, Inc, a biotechnology company, develops therapeutics and vaccines based on messenger RNA for the treatment of infectious diseases, immuno-oncology, rare diseases, cardiovascular diseases, and auto-immune diseases in the United States and internationally. The company has 44 development programs, which includes 26 in clinical trials across seven modalities comprising prophylactic vaccines, systemic secreted and cell surface therapeutics, cancer vaccines, intratumoral immuno-oncology, localized regenerative therapeutics, systemic intracellular therapeutics, and inhaled pulmonary therapeutics.
Read More - Current Price
- $147.66
- Consensus Rating
- Hold
- Ratings Breakdown
- 5 Buy Ratings, 8 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $228.83 (55.0% Upside)
#2 - Intuitive Surgical (NASDAQ:ISRG)
Intuitive Surgical (NASDAQ:ISRG) looks like it has recovered from the effects of the pandemic. The medical device company is best known for its da Vinci robotic surgical system. This system is frequently used for the types of surgeries that are frequent with an aging population. And in the company’s most recent earnings report they stated that surgical procedures with the Da Vinci system grew by 28% in 2021. In fact, one out every six surgeries today features some form of robotic assistance.
However, despite the pandemic ISRG stock has been a model of consistent growth for long-term investors. In the five years prior to 2020 (the year of the pandemic), Intuitive Surgical delivered a total return of over 235%. That’s an average of 47% per year. Despite a steep drop at the onset of the pandemic and a second drop at the start of 2022, the stock has climbed by 41% in that time. And analysts give the stock and 18% upside from its current level.
About Intuitive Surgical
Intuitive Surgical, Inc develops, manufactures, and markets products that enable physicians and healthcare providers to enhance the quality of and access to minimally invasive care in the United States and internationally. The company offers the da Vinci Surgical System to enable complex surgery using a minimally invasive approach; and Ion endoluminal system, which extends its commercial offerings beyond surgery into diagnostic procedures enabling minimally invasive biopsies in the lung.
Read More - Current Price
- $229.16
- Consensus Rating
- Buy
- Ratings Breakdown
- 13 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $327.41 (42.9% Upside)
#3 - UnitedHealth Group (NYSE:UNH)
How you feel about UnitedHealth Group (NYSE:UNH) will depend on how much you like the company’s growth outlook. The company is the world’s largest health insurer. The company just posted a year of record earnings and revenue. And the company’s revenue is only expected to increase for the next two years. If you believe that higher earnings are a precursor to a growing share price, than UNH stock looks like a solid buy.
The stock is trading close to its consensus price target. However, since its latest earnings report, two analysts have given UNH stock a significantly higher price target. The stock is also a favorite among institutional investors.
And income-oriented investors should love the company’s dividend that currently pays $5.80 per year. This is an example where the dividend yield of 1.13% doesn’t look that impressive, but the payout makes it very rewarding. And UnitedHealth has increased the dividend in each of the last 13 years.
About UnitedHealth Group
UnitedHealth Group Incorporated operates as a diversified health care company in the United States. It operates through four segments: UnitedHealthcare, Optum Health, Optum Insight, and Optum Rx. The UnitedHealthcare segment offers consumer-oriented health benefit plans and services for national employers, public sector employers, mid-sized employers, small businesses, and individuals; health care coverage and well-being services to individuals age 50 and older addressing their needs for preventive and acute health care services, as well as services dealing with chronic disease and other specialized issues for older individuals; Medicaid plans, children's health insurance and health care programs; health and dental benefits; and hospital and clinical services.
Read More - Current Price
- $507.11
- Consensus Rating
- Buy
- Ratings Breakdown
- 19 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $558.24 (10.1% Upside)
#4 - Teladoc Health (NYSE:TDOC)
Another way to invest in the health care sector is to look for stocks that focus on emerging trends. That’s the bullish argument for Teladoc Health (NYSE:TDOC). As the pandemic restrictions ease, investors are getting a chance to see what “habits” have now changed in a more sticky way.
Like e-commerce, the pandemic has been a “proof of concept” for telehealth. It’s not that Teladoc is going to replace all personal interaction between patient and physician. However, for patients who require routine monitoring for chronic conditions, for some mental health appointments, and non-threatening medical issues, it may be a convenient option.
TDOC stock is down 66% in the last 12 months, but analysts give the stock a $118.96 price target, which is an 89% upside. Investors may want to wait until institutional investors are buying with more confidence. Right now, sellers outweigh buyers which likely explains the short interest which is over 15% as of this writing.
About Teladoc Health
Teladoc Health, Inc provides virtual healthcare services in the United States and internationally. The company offers a portfolio of services and solutions covering non-urgent, episodic, chronic, and complicated medical conditions, including diabetes, hypertension, chronic kidney disease, cancer, congestive heart failure, and mental health conditions.
Read More - Current Price
- $35.77
- Consensus Rating
- Hold
- Ratings Breakdown
- 8 Buy Ratings, 19 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $85.70 (139.6% Upside)
#5 - AstraZeneca (NASDAQ:AZN)
AstraZeneca (NASDAQ:AZN) is another stock that is benefiting from its Covid-19 vaccine. It’s also been a beneficiary of the shift towards international stocks. However, AstraZeneca is much more than a Covid-19 play. In fact, a key catalyst for AZN stock in 2021 was Lynparza (Olaparib), the company’s breast cancer drug that it is developing in tandem with Merck (NYSE:MRK).
Specifically, this drug is used to treat people with a genetic form of early breast cancer. The hope is that the drug will focus attention on the need for DNA testing to diagnose breast cancer. In a phase 3 trial, the drug showed that it “reduced risk of death by 32% in the adjuvant treatment of patients with germline BRCA-mutated high-risk early breast cancer”
AZN stock is up 24% in the last 12 months, but is trading near the top end of its 52-week high. And currently the stock looks a bit overvalued. However, the company has strong future growth prospects and does pay a dividend.
About AstraZeneca
AstraZeneca PLC, a biopharmaceutical company, focuses on the discovery, development, manufacturing, and commercialization of prescription medicines. Its marketed products include Calquence, Enhertu, Faslodex, Imfinzi, Iressa, Koselugo, Lumoxiti, Lynparza, Orpathys, Tagrisso, and Zoladex for oncology; Brilinta/Brilique, Bydureon/Byetta, BCise, Byetta, Crestor, Evrenzo, Farxiga/Forxiga, Komboglyze/Kombiglyze XR, Lokelma, Onglyza, Qtern, and Xigduo/Xigduo XR for cardiovascular, renal, and metabolism diseases; Bevespi Aerosphere, Breztri Aerosphere, Daliresp/Daxas, Duaklir Genuair, Fasenra, Pulmicort, Saphnelo, Symbicort, and Tudorza/Eklira/Bretaris for respiratory and immunology; and Andexxa/Ondexxya, Kanuma, Soliris, Strensiq, and Ultomiris for rare diseases.
Read More - Current Price
- $67.40
- Consensus Rating
- Buy
- Ratings Breakdown
- 9 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $8,246.29 (12,134.8% Upside)
#6 - Omega Healthcare Investors (NYSE:OHI)
A lower risk way to invest in the health care sector is through a real estate investment trust (REIT) that specializes in health care properties. That’s the case with Omega Healthcare Investors (NYSE:OHI). The company invests in skilled nursing and assisted living facilities which will continue to be in demand as the aging of America continues.
Like all REITs, Omega Healthcare pays a dividend that currently pays $2.68 per share annually which calculates to a current dividend yield of 9.35%. Furthermore, the company has increased its dividend in each of the last 19 consecutive years.
OHI stock is down 23% in the last 12 months and is still down 34% from its pre-pandemic highs. The stock went on a bit of a roller coaster ride in 2021 perhaps dictated by the uneven nature of the recovery. However, with Covid restrictions now largely lifted, the outlook for Omega looks better. Analysts give the stock a $36.30 price target which would be a 24% gain to go along with an attractive dividend.
About Omega Healthcare Investors
Omega is a real estate investment trust that invests in the long-term healthcare industry, primarily in skilled nursing and assisted living facilities. Its portfolio of assets is operated by a diverse group of healthcare companies, predominantly in a triple-net lease structure. The assets span all regions within the US, as well as in the UK.
- Current Price
- $29.62
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 6 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $34.70 (17.2% Upside)
#7 - LumiraDx Ltd (NASDAQ:LMDX)
Whenever we analyze a group of sector stocks, we like to include stocks that fit every investing style. So, closing out this list of health care stocks is LumiraDx Ltd (NASDAQ:LMDX). This is a small-cap company that is involved in point-of-care diagnostics. The company provides diagnostic information to health care providers at the point of care. This allows decisions to be made that can, in theory, head off larger health problems which can help to lower cost.
This is a growing sector and the company does have competitors in this space. LumiraDx is not yet profitable and they are not expected to be anytime soon. And not many analysts cover the stock right now. Nevertheless, the company is starting to draw interest from institutional investors. Whenever investors look at stocks like LMDX, they also need to consider that the company may become a takeover target if it continues to post revenue growth.
About LumiraDx
LumiraDx Limited operates as a point of care diagnostic company. It focuses on transforming community-based healthcare by providing critical diagnostic information to healthcare providers. The company was formerly known as Point of Care Testing Limited and changed its name to LumiraDx Ltd in January 2018.
Read More - Current Price
- $3.90
- Consensus Rating
- Buy
- Ratings Breakdown
- 3 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $12.75 (226.9% Upside)
In 2022, health care spending is expected to be 6.7%. This is slightly below the 7% growth in spending between 2020 and 2021. However, it is higher than pre-pandemic growth which shows that the pandemic may still have a long tail. Covid-19 related expenses are expected to continue as will spending to address mental health.
And this doesn't include the ongoing need for treatment of chronic conditions such as cancer or diabetes. It's no wonder that even in the midst of the pandemic, spending on health care grew between 2019 and 2020. And with inflation likely to remain a concern for the rest of 2022 and beyond, health care is one sector that will have no problem passing along its costs.
This growth shows the adaptability this sector continues to exhibit. From telehealth to robotic surgeries, to AI being used to help predict health outcomes, there are many ways that the health care system continues to benefit from innovation.
