Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



3 Great Buy-and-Hold Health-Care Stocks

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

This could have been an enormously more difficult effort. I started out with the goal to identify the three best stocks in health care to buy and hold for years, even decades. To come up with a list of the absolute best was daunting. There are just too many variables to say with unwavering conviction that any three stocks are the best to buy and hold.

Identifying great buy-and-hold health-care stocks, though, was much easier. There are plenty to choose from. Here are three that I think meet the mark.

1. Johnson & Johnson (NYSE: JNJ  )
Picking Johnson & Johnson was the easiest choice of all. If you look around your house, odds are you'll find several J&J products. If you looked around the hospital nearest to your house, chances are you'd find multiple J&J products there also. What makes J&J a great buy-and-hold investment is that this would have been as likely 20 years ago -- and 20 years from now -- as it is today.

J&J essentially consists of multiple businesses rolled into one. The company is probably best known for its consumer products such as Band-Aids and Listerine. It also claims a large medical devices and diagnostics division. J&J's pharmaceuticals segment developed blockbuster drugs including Remicade and Velcade.

With strong products and continual innovation, Johnson & Johnson saw its stock climb more than 3,100% in the past 30 years and more than 800% in the past 20 years. Along the way, the company not only consistently paid out dividends -- it raised them year in and year out also. If you had reinvested those dividends, by the way, that 30-year return soars to 5,800% and the 20-year return jumps to nearly 1,400%.

2. Express Scripts (NASDAQ: ESRX  )
Unlike J&J, Express Scripts doesn't pay a dividend. However, the company's pharmacy benefits management, or PBM, services should remain in demand for years to come. That's especially likely as the baby boomer generation ages and needs more prescription drugs.

There are other PBMs that should prosper also. I like Express Scripts, though, in large part because of its economies of scale as the largest PBM in the nation. That scale should serve as a competitive advantage in coaxing more members to use lower-cost sources like mail-order pharmacies, use cheaper generic drugs, and adhere to prescribed medication regimens.

If you bought the stock 20 years ago and held on, you would now be sitting on gains of almost 12,000%. Yep -- a $10,000 investment in Express Scripts in 1993 would have turned into more than $1.1 million.

3. Gilead Sciences (NASDAQ: GILD  )
You might be surprised to see a biotech stock included in the mix of buy-and-hold ideas -- especially one with several drugs losing patent protection in the next few years. I think that Gilead Sciences is one to keep for the long haul, though.

Gilead's gains over the past 20 years rival those of Express Scripts. It currently dominates the HIV/AIDS drug market with products including Atripla, Stribild, Truvada, and Viread. The bad news is that Gilead faces the expiration of patents on some of these drugs over the next decade and increasing threats of competition, particularly from ViiV Healthcare, a partnership formed by GlaxoSmithKline (NYSE: GSK  ) and Pfizer (NYSE: PFE  ) . 

While Glaxo and Pfizer could grab some market share, I think Gilead will maintain its leadership in HIV/AIDS. The company also appears to be poised to be a major player in the lucrative hepatitis C virus, or HCV, market.

Past performance ...
Nearly every financial document you come across will include a familiar phrase along the lines of "past performance is not necessarily indicative of future results." It's absolutely true, of course. Just because any stock performed well in the past doesn't mean they will automatically continue to do well. However, it is reasonable to look at a company's business model and conclude that the probability is pretty good that the model is sustainable into the future.

I wouldn't attempt to predict how much J&J, Express Scripts, and Gilead shares will increase (or decrease) over the next 10 to 20 years. However, I like the business models for these three companies and suspect that they will all be successful over the long run. Buy and hold? You bet.

You can try every kind of investing approach under the sun, but the best method is still to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names more stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2599355, ~/Articles/ArticleHandler.aspx, 9/27/2016 1:44:59 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 4 hours ago Sponsored by:
DOW 18,094.83 -166.62 -0.91%
S&P 500 2,146.10 -18.59 -0.86%
NASD 5,257.49 -48.26 -0.91%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/26/2016 4:00 PM
ESRX $70.63 Down -0.71 -1.00%
Express Scripts CAPS Rating: *****
GILD $80.62 Down -0.75 -0.92%
Gilead Sciences CAPS Rating: *****
JNJ $117.78 Down -1.03 -0.87%
Johnson and Johnso… CAPS Rating: *****
GSK $42.96 Down -0.46 -1.06%
GlaxoSmithKline CAPS Rating: ***
PFE $33.64 Down -0.62 -1.81%
Pfizer CAPS Rating: ****