There's a lot of volatility in healthcare stocks. That's especially the case with earnings season underway. In this Motley Fool Live video, recorded on July 19, 2021, healthcare and cannabis bureau chief Corinne Cardina and Motley Fool contributor Keith Speights discuss three key things that healthcare investors should remember right now.
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Corinne Cardina: So, Keith, let's wrap up with three takeaways for healthcare investors right now.
Keith Speights: Well, No. 1, as always, and I will probably always make this the first anytime I'm being asked this question: Focus on the long term. Don't let temporary issues that negatively impact the company's performance or stock price distract you from its long-term prospects.
I'll use Intuitive Surgical (ISRG 1.22%) as an example here. The company had some really disappointing quarterly results back in 2020 due to the COVID-19 pandemic, but Intuitive Surgical's long-term prospects were and are as strong as ever. Coming up on the Q2 earning season, don't let some temporary issues in any company's Q2 results distract you from that company's long-term prospects.
Second, I would say, is be wary of the super-hyped meme stocks. And some of them are healthcare stocks. They again all the attention. They get all the buzz.
But again, this comes back to having a long-term focus. Many of these super-hyped stocks might rise because of a short squeeze or some other temporary phenomena, but their long-term prospects are questionable in many cases. Just be wary of those. Don't buy a stock just because everybody is talking about it.
Then that brings me to the third takeaway: Pay attention to valuations. We are in a really high-priced stock market right now. When there's a pullback -- and I say when; it's a matter of when, not if -- there is going to be a pullback.
Cardina: A little bit today.
Speights: Yeah, we've seen it a little bit today. I don't know if it will continue. We might see a big bounce-back tomorrow. But look, stocks that are priced for perfection will get hit the hardest in big pullbacks. Pay attention to valuations.
Having said that, though, Corinne, look, sometimes stocks deserve high valuations. Forward earnings multiples, for example, don't always give you the full story.
I mentioned Intuitive Surgical. This stock trades at over 70 times expected earnings. That's a nosebleed level. But Intuitive Surgical is only scratching the surface of the potential for robotic surgery, so I'm not as worried about the valuation there. But still, it's important to watch those valuations.
