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2 Top Healthcare Stocks That Could Boost Your Portfolio in September (and Beyond)

By Prosper Junior Bakiny – Sep 9, 2021 at 11:07AM

Key Points

  • One of these companies is a drugmaker with a strong presence in the market for diabetes medicines.
  • The other is a hospital chain built to succeed in the post-pandemic world.

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These two companies have outperformed the market in the past year, and they are likely to continue doing so.

The stock market has been wild over the past eight months. Between short squeezes, the meme-stock revolution, fears surrounding a new wave of COVID-19 infections, and the impact of inflation, there has hardly been a dull moment for investors. But amid all these storylines, it's important to remember that the short-term ups and downs are hardly worth stressing over.

History tells us that those who hold on to excellent stocks will be rewarded down the road. The healthcare industry is an especially great place to look for such companies because medical care isn't something that will become obsolete anytime soon. In that spirit, here are two healthcare stocks that could be excellent additions to your portfolio: Novo Nordisk (NVO 2.05%) and HCA Healthcare (HCA -2.10%)

NVO Total Return Level Chart

NVO Total Return Level data by YCharts 

1. Novo Nordisk

Denmark-based Novo Nordisk is one of the leading diabetes-focused drugmakers. As of May, the company had a 51.5% share of the market for glucagon-like peptide 1 agonists (GLP-1), a class of medicines that helps patients with type-2 diabetes produce the optimal amount of insulin, up from the 49.1% share of this market it held in May 2020.  

Two of Novo Nordisk's top GLP-1 drugs are Rybelsus and Ozempic. In the first half ending June 30, sales of Rybelsus soared by 187% year over year in Danish kroner (DKK) to 1.7 billion DKK ($271.6 million), while sales of Ozempic grew by 47% year over year to 14.1 billion DKK ($2.3 billion). That said, the year-over-year comparisons aren't great in this case because the pandemic hurt the company's sales in the first half of 2020.

Still, Rybelsus and Ozempic are projected to remain key growth drivers for Novo Nordisk. According to some estimates, the combined sales from these medicines will reach about $15 billion by 2026. For reference, these drugs recorded a combined $3.7 billion in 2020.

Doctor writing the word "diabetes."

Image source: Getty Images.

Novo Nordisk's obesity segment is also worth mentioning. In the first half of the year, the company's revenue from this unit increased to 3.5 billion DKK ($559.1 million), 23% higher than the prior-year quarter. Again, this year-over-year sales growth figure is somewhat inflated, but the company's prospects in this market are bright.

In early June, the U.S. Food and Drug Administration approved Novo Nordisk's Wegovy, an obesity treatment. The launch of this product in the U.S. and its subsequent adoption by customers have been so rapid that Novo Nordisk ran into temporary shortage issues. The drugmaker expects Wegovy to become an integral part of its growth strategy moving forward.

Meanwhile, Novo Nordisk is facing tough competition from Eli Lilly and Sanofi in the insulin market. These three companies dominate the worldwide insulin space. Sales of Novo Nordisk's insulin products declined by 5% year over year to 28 billion DKK ($4.4 billion) during the first half of the year. The drop was due to lower prices and lower sales volume.

However, this shouldn't be any cause for concern for investors. Novo Nordisk has been one of the leaders in the insulin market for several decades, and it boasts promising pipeline candidates in this area, including Icodec, a potential once-weekly insulin product that could become a big deal, if approved. With the number of people with diabetes projected to continue growing, and given Novo Nordisk's track record, investors can fully expect the company to continue being a major player in this area and delivering strong financial results.

Buying shares of this pharma stock today could help you beat the market in the long run.

2. HCA Healthcare 

Like many other hospital chains, HCA Healthcare's business took a severe hit during the pandemic. The company generates revenue based on inpatient occupancy levels and the services physicians order for their patients. The volume of elective surgeries decreased significantly due to lockdown measures put in place to slow the spread of COVID-19, thereby harming HCA Healthcare's top line.

But the healthcare giant is on the rebound. During the second quarter, HCA Healthcare's revenue jumped by 30% year over year to $14.4 billion. The company's net income of $1.7 billion jumped by 36.8% year over year. This was on the back of rises in admissions and patient days.

Overall, it was an excellent quarter for HCA Healthcare, and with its business getting back to its pre-pandemic state, the company revised its guidance upward for the fiscal year 2021. HCA Healthcare now expects revenue between $57 billion and $58 billion, up from its previous projection of $54 billion to $55 billion.

HCA Healthcare also expects earnings per share between $16.30 and $17.10, compared with its previous guidance of $13.30 to $14.30.

Doctor shaking patient's hand.

Image source: Getty Images.

Beyond the current year, HCA Healthcare's prospects look great. The company is one of the largest hospital chains in the U.S., boasting 187 acute care hospitals as of June 30. It also runs psychiatric hospitals, surgery centers, endoscopy centers, rehabilitation centers, and more. HCA Healthcare's facilities span 20 states, although it particularly focuses on Florida and Texas (the company generated 49% of its revenue from its facilities in these two states during the second quarter).

HCA Healthcare plans to expand the breadth of services it offers, and thanks to its already vast network -- and its reach across the U.S. -- the company will likely continue to attract physicians and patients. This strategy has worked well so far for HCA Healthcare. The company's market share increased from 23% in 2011 to 27% at the end of 2020. In my view, HCA Healthcare's master plan will continue to yield positive results, making this a great stock to add to your portfolio today. 

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool recommends HCA Healthcare and Novo Nordisk. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Novo Nordisk Stock Quote
Novo Nordisk
NVO
$121.23 (2.05%) $2.44
Eli Lilly and Company Stock Quote
Eli Lilly and Company
LLY
$365.77 (0.14%) $0.52
Sanofi Stock Quote
Sanofi
SNY
$45.54 (0.33%) $0.15
HCA Healthcare Stock Quote
HCA Healthcare
HCA
$234.35 (-2.10%) $-5.02

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

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