If the coronavirus stock market has showed investors anything, it's been that some companies and industries are far better equipped to face the pitfalls of a recession than others. The year 2020 was a banner year for many top healthcare stocks, and investors took notice.
Healthcare stocks encompass a variety of subsectors, from the pharmaceutical industry to telemedicine to health insurance. In a general sense, the products and services these companies provide are in demand regardless of market conditions, and a global pandemic can be a catalyst that heightens this demand.
If you want to invest in healthcare stocks in the New Year and don't know where to start, here are three no-brainer companies that should be at the top of your buy list.
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Teladoc Health
The way healthcare providers conduct patient visits is changing, and never has this been more evident than during the pandemic. Telemedicine giant Teladoc Health (TDOC -1.52%) reported a 92% increase in total visits on its platform during the first quarter compared to the year-ago period, while patient visits jumped by 203% and 206% during the following two quarters. The company's revenues also grew by an exponential rate during the first three quarters of 2020, up 41%, 85%, and 109% from the same quarters in 2019.
Teladoc has managed to keep its balance sheet free of excess debt and has $1.2 billion in cash and cash equivalents compared to about $201 million in total current liabilities. The company also had a history of generating consistent, above-average growth before the coronavirus pandemic. In 2019, for example, Teladoc's revenue spiked 32% from the prior year.
Teladoc continues to leverage its momentum with high-profile acquisitions that are setting the company up for long-term success in the age of digital medicine and making access to an ever-growing customer base nearly limitless. The company purchased integrated care provider InTouch Health in July, which formed a "single virtual care delivery leader from hospital to home," followed by its October acquisition of digital health management company Livongo. Teladoc isn't just a stellar coronavirus stock -- it's a company you can buy and hold for its explosive growth potential in the pandemic world and beyond.
Amgen
Biopharmaceutical company Amgen (AMGN 2.35%) is popular with investors for a few reasons. First, there's the company's dividend, which pays an above-average yield of 3.2%. Management also announced on Dec. 16 that it would be increasing investors' upcoming first-quarter dividend payment by a robust 10%.
Amgen's drug portfolio, featuring products that treat conditions ranging from cancer to arthritis to osteoporosis, also generates a consistent level of growth that is particularly attractive to the long-term investor. For example, while Amgen reported its revenues down by a slight 2% in 2019, sales of three of its top products -- osteoporosis drug Prolia, monoclonal antibody Repatha, and migraine medication Aimovig -- grew 17%, 20%, and 157% compared to 2018.
Despite the challenges of the pandemic economy, Amgen reported positive revenue growth in each of the first three quarters of 2020: 11%, 6%, and 12%. Otezla, which Amgen purchased from Celgene in November 2019, is by far one of the company's most profitable drugs. The product amassed $1.6 billion in sales during the first nine months of 2020 alone. Another of Amgen's blockbuster products, immunosuppressant drug Enbrel, raked in $3.7 billion in sales during that period.
Amgen has fewer than two dozen approved products in its stable, but its targeted focus on highly lucrative therapeutic areas continues to fuel its growth and shareholder returns. If you're in the market for a high-quality dividend stock that has raised rather than slashed its payout during the pandemic and has the means to generate continued growth, Amgen is a solid egg to keep in your basket.
Pfizer
Pfizer (PFE 2.40%) was one of the most talked-about healthcare stocks of 2020, but its coronavirus vaccine success isn't the only reason for investors to buy the stock in 2021. The company's dividend is a significant draw for investors seeking income-generating stocks. With a current yield of 4.3%, Pfizer's dividend more than beats that of the average stock on the S&P 500.
As the first company to win the U.S. Food and Drug Administration's coveted emergency use authorization for its coronavirus vaccine created with BioNTech, Pfizer's distribution efforts are already well underway in the U.S., the U.K, and across Europe. Each treatment course of the vaccine will cost approximately $39, and Pfizer is distributing hundreds of millions of doses of the vaccine between now and the end of next year.
Pfizer hasn't been immune to the economic impact of the coronavirus pandemic, and it reported modest operational revenue declines in each of the first three quarters of 2020. Fortunately, Pfizer's biopharma revenues grew 12%, 6%, and 4% during these quarters from the year-ago periods, reinforcing the underlying strength of its largest business segment.
The company's recent merger of Upjohn with Mylan to form a new leader in generics and biosimilars called Viatris will allow Pfizer to pass on some of its older products and focus on new avenues of growth. Management estimates that between now and the end of 2025, Pfizer will achieve a revenue compound annual growth rate of 6% or more.
Vaccine hype aside, Pfizer's forward-looking growth trajectory looks better than ever, and the continued success of its biopharma division despite headwinds reiterates the company's strong foundation. Given the backlog of orders Pfizer intends to fulfill in 2021, its coronavirus vaccine should also add a notable source of blockbuster growth to its balance sheet, at least in the near term. If you like dividends (who doesn't?) and tend to be a more conservative investor, Pfizer's moderate, sustainable growth fueled by its top-notch portfolio of products could be a match made in heaven.
