Healthcare has long been a pretty wise investment, as the industry consistently grows every year. As a matter of fact, some analysts believe this economic sector could grow by more than 7% through 2027. That is nearly double the expectation for overall economic growth over the same period. In addition healthcare spending in the United States accounts for almost 20% of the Gross Domestic Product (2020), even US patients pay more for health care than any other comparably advanced global economy.
For these reasons and more, healthcare stocks are often wise to include in any investment portfolio. But while the numbers are promising, investing in healthcare stocks is not the same simple matter. Accordingly, here are four healthcare stocks worth watching right now, two of which might make smart buys.
United Health Group is a Moderate Buy
The only company on this list to offer insurance options in addition to healthcare products is United Health Group (NYSE: UNH). With a current share value of, UNH is up more than 2.3% on the year so far; however, some other factors contribute to make UNH a Moderate BUY this week.
For one, they have an impressive upside of 15.80% with at least 13% earnings growth. This suggests that not only do analysts foresee the company growing profit, but the expected earnings to grow parallel. United Healthgroup has a similarly impressive Price-to-Sales ratio (P/S) of 1.67—with a nearly unheard-of Price-to-Earnings ratio (P/E) of 25.16—making UNH a perfect example of these two metrics. And with a beta of 0.75, they are 25% less volatile than the S&P 500.
Eli Lilly & Co is also a Moderate BUY
After a monumental decline this week, Eli Lilly & Co (NYSE: LLY) is certainly one healthcare stock to watch, if not BUY. A fake Eli Lilly Twitter account claimed the company would make insulin free of charge, resulting in the pharmaceutical company pulling several million dollars in marketing from Twitter. More importantly, the fiasco plunged LLY share price, even as the company attempted to minimize the obvious blowback such a statement would generate.
Fortunately, the company managed to slow the effects and should be ready for a rebound. After all, before this little mishap, the stock was already up more than 25% on the year. More importantly, of course, since the media triage, Eli Lilly is back up to the top 10% of the stock's entire 52-week range, at a share price of $356.06. While the stock is still expected to slip—LLY has a new price target of $346.82 by the next reporting date—analysts project almost 19% earnings growth. And with a beta value of 0.36, LLY could prove fruitful when its recovery from the Twitter incident hit full swing.
Johnson & Johnson is a HOLD
Sitting near the median of its 52-week range, Johnson & Johnson (NYSE: JNJ) has a current share price of $171.91. This is barely up on the year, at all; only 0.77% year-to-date. The growth may not be immediately noticeable, but a net margin approaching 20%—and 35% Return-on-Equity (RoE)—certainly help make the stock more attractive. A 0.57 beta value, might also make the stock more encouraging.
Unfortunately, this may not be the best time to make any more on JNH. While analysts expect a decent +7.20% upside, for example, a concernedly high dividend payout ratio of 62.95%, could cast a pall over any strong hope for quality growth. Johnson & Johnson expects to publish their next earnings report in late January of 2023. For now, then, analysts suggest you simply Hold on JNJ, at least until then.
Pfizer Inc. is also a HOLD
Among these healthcare stocks, Pfizer Inc.'s current rating may be the biggest surprise. For one, Pfizer, Inc. (NYSE: PFE) is down around -17% on the year and analysts project their earnings could fall as much as -24% in the next 12 months. A current P/E of 9.47—more than half that of JNJ and nearly one-third of UNH—is remarkably lower than they would have liked.
Fortunately, Pfizer is in a convenient position as Moderna's stock (NASDAQ: MRNA) recently surged on positive news regarding their new COVID-19 booster. MRNA's jump helped shore up other similar properties, including PFE, working to improve Covid-related care. Pfizer, of course, has their own Covid booster in the works.
Based solely on the numbers, a HOLD rating makes a lot of sense for Pfizer, today. They are certainly not in the worst position but expectations are low in the short term. However, their current path is not exactly a straight-and-narrow path to the top.