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3 Hot Healthcare Stocks to Buy in the Next Market Correction

By Cory Renauer – Updated Jul 23, 2020 at 9:14AM

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Put these gems in your watchlist and get ready to buy the dips.

These three healthcare stocks have soared since the market tanked in March, and they all have what it takes to keep climbing into the long run. That makes them perfect stocks to buy up the next time the market takes a sudden dip.

If you missed out on the last stock market correction, don't worry the next one is always right around the corner. To help you get ready, here are three gems at the top of their respective niches.

Company (Symbol) Performance Since March 16, 2020 Industry Price-to-Sales Ratio
Livongo Health (LVGO) 334% Remote patient monitoring 46.6
Veeva Systems (VEEV 1.12%) 86% Cloud services 34.2
Teladoc Health (TDOC -2.12%) 74% Telemedicine 26.7

Data source: Yahoo! Finance.

Three healthcare providers with their thumbs up.

Image source: Getty Images.

1. Teladoc Health: Growing fast

This telehealth service provider was expanding at an impressive pace before a pandemic forced physicians to keep in-person interactions to a minimum. In 2019 Teladoc Health facilitated 57% more telehealth visits than during 2018.

To meet surging demand driven by social distancing efforts the company has more than doubled the number of licensed physicians in its network this year and it looks like the new recruits have been busy. During the first three months of 2020, total visits rose 92% year over year to 2.0 million.

While most companies have withdrawn forward guidance for 2020, Teladoc expects a rapidly expanding top line fed by reliable subscription revenue from a growing client base plus fees from individuals without access to subscription benefits. During the first quarter, revenue from users with fee-only access jumped 205% year over year to $12.6 million.

Teladoc is already America's largest provider of virtual care services, and the company expects to add 6 million to 7 million members in the second quarter alone. A commanding lead in a rapidly growing niche make this a great stock to buy the next time the stock market dips.

2. Veeva Systems: Tree saver

Companies that discover, develop, or commercialize drugs, medical devices, or diagnostics produce reams of data. More than ever, they're relying on cloud services from Veeva Systems to keep track of it all. During Veeva Systems fiscal first quarter, which ended April 30, 2020, total revenue climbed 38% year over year to $337.1 million.

Pharmaceutical sales representatives that have been forced to meet with physicians remotely have been leaning heavily on Veeva's CRM Engage service, which facilitates meetings via Zoom and Microsoft Teams. Sales meetings held between doctors and Veeva's clients were 30 times more frequent in April than in February.

Veeva's also launching a patient-facing application for clinical trials called MyVeeva to help volunteers manage appointments, and facilitate remote doctor visits. With an ever-expanding line of services that life science businesses can't live without, any potential competitors have an uphill battle ahead of them.

A man holds a stethoscope to a transparent stock chart.

Image source: Getty Images.

3. Livongo Health: Remote monitoring

Across America, healthcare plan sponsors are learning that paying Livongo Health to help employees manage their chronic conditions is a lot less expensive than expecting them to take care of themselves. Soaring demand drove Livongo's total revenue 115% higher year over year to $68.8 million.

Livongo thinks there are 147 million Americans living with a chronic condition, and 40% are trying to manage more than one at the same time. The COVID-19 pandemic has amplified demand for remote monitoring solutions but the company's only scraped the surface. The number of members enrolled in the company's most popular service, Livongo for Diabetes was just 328,000 at the end of March.

Earlier this month, the company revised prior second-quarter revenue guidance sharply upward to a range between $86 million and $87 million from a range between $73 million and $75 million predicted in May. With increasing enrollment in services for hypertension, weight management, and behavioral health, this probably isn't the last upward guidance revision we'll see from Livongo.

They don't always look back

While there's always another market correction around the corner, history's top-performing stocks don't always dip along with the rest of the market. You could end up waiting in vain for a better price while Livongo, Veeva, and Teladoc continue soaring.

The market has inflated these stocks with high expectations, but all three companies have what it takes to provide market-beating gains at their current prices. 

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Cory Renauer has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Livongo Health Inc, Microsoft, Teladoc Health, Veeva Systems, and Zoom Video Communications and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, and short August 2020 $130 calls on Zoom Video Communications. The Motley Fool has a disclosure policy.

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