Health-Care Stocks: Growing Like Gangbusters

These health-care stocks offer great growth prospects.

Mar 15, 2014 at 9:30AM

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some health-care stocks to your portfolio but don't have the time or expertise to hand-pick a few, the Health Care Select Sector SPDR ETF (NYSEMKT:XLV) could save you a lot of trouble. Instead of trying to figure out which stocks will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. This ETF, focused on health-care stocks, sports a very low expense ratio -- an annual fee -- of 0.16%.

This health-care stocks ETF has outperformed the world market over the past five, 10, and 15 years. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

Why health-care stocks?
For starters, our planet's growing and aging population will keep demand rising for health-care products and services. On top of that, Obamacare is ushering more Americans into health coverage, delivering more consumers to companies treating them – and thus boosting the prospects for many health-care stocks.

More than a handful of health-care stocks had strong performances over the past year. Regeneron Pharmaceuticals, (NASDAQ:REGN), for example, surged 91%, partly on the success of its wet age-related macular degeneration drug, Eylea (which may soon gain FDA approval to treat diabetic macular edema, too). Eylea generated close to $2 billion in sales last year. Regeneron has lots of irons in the fire, including treatments for high cholesterol and rheumatoid arthritis, which it's developing in partnership with Sanofi. (The FDA has recently expressed concerns about the cholesterol-lowering drug.)

Gilead Sciences (NASDAQ:GILD) popped 70%, with investors excited about its recently approved oral hepatitis-C treatment, Sovaldi, with its reported cure rates near 90% in clinical trials. Insurers and medical bigwigs are less excited, though, objecting to its very steep price tag of around $84,000 for a 12-week course. The company's fourth quarter was strong, with revenue up 21% on strong new-product sales. Sovaldi has the potential to become a blockbuster , with sales exceeding $1 billion. Meanwhile, Sales of Gilead's HIV drug Stribild are growing rapidly, and it might achieve blockbuster status this year, too.

Celgene Corporation (NASDAQ:CELG), another biotech concern, is on a roll, thanks in part to its anemia drug, Revlimid, which now contributes 65% of revenue. It's not ideal to depend on one product so much, but as my colleague Stephen Simpson has noted, Celgene has "a deep early stage pipeline of oncology drugs" and "meaningful label expansion opportunities for approved drugs." It appears to be undervalued, too, with its forward P/E ratio near 17 and EPS growth expected between about 20% and 30% over the next few years.

Other health-care stocks didn't do quite as well over the past year, but could see their fortunes change in the coming years. Allergan (NYSE:AGN), for example, only grew 17%, but it has been beating the S&P 500 lately. It's perhaps best known for its Botox formula, but many don't realize that Botox is also approved to treat conditions other than normal aging, such as migraine headaches and overactive bladders. Some worry about patent expiration for its dry-eye treatment Restasis, but bulls like its strong balance sheet and free cash flow, which could help it acquire smaller companies and their drugs. It's also expected to grow its earnings by double digits in the coming years.

The big picture
If you're interested in adding some health-care stocks to your portfolio, consider doing so via an ETF. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.

A new approach to cancer treatment
For even more compelling investment ideas, check out The Motley Fool's brand-new free report "2 Game-Changing Biotechs Revolutionizing the Way We Treat Cancer," detailing a new technology that big pharma is endorsing through partnerships, and the two companies that are set to profit from this emerging drug class. Click here to get your copy today.

Selena Maranjian, whom you can follow on Twitter, owns shares of Celgene, Gilead Sciences, and Regeneron Pharmaceuticals. The Motley Fool recommends Celgene and Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers