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These 3 Healthcare Stocks Are the Best Bets for 2021

By Alex Carchidi - Jan 22, 2021 at 6:25AM

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Investing in the recovery from the pandemic could pay off big.

With a new president taking office and an economic recovery (hopefully) in the works, 2021 is already bringing about a roaring bull market. Plus, while things might be looking dark with the pandemic at the moment, there's a good chance that deploying millions of the newly approved coronavirus vaccines will put the world on a better path over the course of the year. With these two sunny possibilities in mind, how should you allocate your portfolio?

In my view, there are three healthcare stocks that are going to be great investments in 2021. All three make in-demand products, and they're all about to experience new economic benefits to boot.

A doctor holds a piggy bank that's wearing a surgical mask.

Image source: Getty Images.

1. Novavax

The vaccine developer Novavax (NVAX -8.57%) has two drivers for growth this year: its coronavirus vaccine candidate and its NanoFlu jab for seasonal influenza. In the U.S. and Mexico, its coronavirus candidate entered its phase 3 clinical trials for efficacy at the end of December. Phase 3 trials in the U.K. are already in full swing, so there may be a data update before the end of the first quarter. Good news from these investigations would send its stock price soaring.

The company's work on NanoFlu is also shaping up to reward investors. NanoFlu has already been proven effective in phase 3 clinical trials, and Novavax is in the final run-up to earning regulatory approval for sale. Though it still needs to prove to regulators that its manufacturing processes are capable of making a consistent product, management is already thinking ahead to the next challenge, and has floated the idea of a combined coronavirus and seasonal flu vaccination. Once NanoFlu hits the market, Novavax will start to report recurring revenue for the first time, which could buoy its stock even further.

2. Intuitive Surgical

In the futuristic-sounding year of 2020, the robotic surgery units made by Intuitive Surgical (ISRG 0.43%) performed thousands of life-saving procedures. In the even more futuristic year of 2021, Intuitive's robots will be responsible for an even larger number of surgeries for two reasons. First, the company has aggressively invested in expanding their base of installed robots for years. And second, people are going to need to catch up on the surgeries they deferred during the pandemic.

Each surgical procedure using the technology requires the use of disposable tools sold by Intuitive. In the fourth quarter of 2020, procedures only increased by 6% compared to the same quarter in 2019. That's an impressive level of growth in the context of heavily burdened healthcare systems, so we should expect it to accelerate in the long run as things get closer to the pre-pandemic normal. This means that especially toward the end of 2021, Intuitive's revenue will start to take off once again.

3. Retractable Technologies

It's stating the obvious to say that coronavirus vaccines are one of the most important economic enablers of 2021. That's why Retractable Technologies (RVP -1.26%) is a great bet. Retractable makes the needles and syringes that healthcare systems need to administer vaccinations. With its quarterly earnings growing by 742% year over year, it's hard to see how 2021 could go badly for the company. But that impressive earnings growth figure doesn't even take one critical thing into account: Coronavirus vaccines weren't widely available for the overwhelming majority of 2020.

So, now that it's actually possible for an increasing number of people to get vaccinated, the demand for Retractable's syringes is probably going to accelerate even more than it already has. Given that it has less than $4 million in debt and it currently operates profitably, there's very little that stands in the way of the company making money hand over fist in 2021. If you're still skeptical about a syringe company being a good investment, take a look at its next earnings report from the fourth quarter of 2020 once it's available. As long as people want to avoid getting the coronavirus by getting vaccinated, this company will be selling syringes faster than shovels in a gold rush.

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Stocks Mentioned

Novavax, Inc. Stock Quote
Novavax, Inc.
$53.42 (-8.57%) $-5.01
Intuitive Surgical, Inc. Stock Quote
Intuitive Surgical, Inc.
$219.07 (0.43%) $0.93
Retractable Technologies, Inc. Stock Quote
Retractable Technologies, Inc.
$3.92 (-1.26%) $0.05

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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