The last decade before retirement is when many people put their wealth-building efforts into overdrive to get ready for their golden years. However, it's important to manage your risk carefully, as a catastrophic misstep could be hard to recover from when you're close to retirement.
Investing a large sum like $150,000 into each of these three healthcare names as part of a diversified portfolio could deliver enough growth to double or more over the coming decade, helping you secure the nest egg you need to retire comfortably. Remember, managing risk can be just as important as generating returns, especially as you approach retirement.
1. Pfizer
Pharmaceutical giant Pfizer (PFE -3.85%) has benefited from COVID-19 as one of the leading vaccine manufacturers. Its vaccine Comirnaty and oral COVID-19 pill Paxlovid are expected to contribute $32 billion and $22 billion, respectively, to management's 2022 revenue guidance of between $98 billion and $102 billion. This figure would represent a 26% increase over Pfizer's 2021 sales.
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However, the important part of this isn't the near-term windfall of cash but what it means for the company over the long term. Pharmaceutical companies live and die by their product pipelines, and Pfizer's nearly $30 billion in 2021 free cash flow gives the company a war chest of money for research and development that should buoy Pfizer's growth efforts, even after its revenues from COVID-19 treatments fade.
Analysts expect the company to grow its earnings-per-share (EPS) by more than 12% annually over the next three to five years, and Pfizer's large balance sheet should help the company fund its growth beyond that. Investors also get the benefit of a dividend that yields 3.2%, so the ingredients are there for total returns of 10% or higher per year, more than enough to double an investment over the next decade.
2. Abbott Labs
The healthcare conglomerate has gone through some changes since spinning its pharmaceutical business out as AbbVie almost a decade ago. Today, Abbott Labs (ABT -0.03%) is positioned primarily in consumer products, medical devices, analytics, testing, and making generic drugs for emerging markets.
Abbott is positioned to cater especially to the cardiology and diabetes fields, which are both fast-growing; heart disease and diabetes are among the most prevalent health conditions in the population. Abbott sells devices for them, including pacemakers, catheters, stents for cardiovascular applications, and a glucose monitoring system for diabetes patients. The company's revenue growth has picked up, growing more than 15% annually over the past five years.
This renewed growth could set the company to perform well over the next decade. Analysts believe Abbott will grow EPS an average of 10% annually over the next three to five years. Abbott also has a storied dividend history that goes back decades before its split with AbbVie. Investors can get a dividend yield of 1.6% on today's share price, which results in low-double-digit total investment returns if the stock's valuation remains constant.
3. UnitedHealth Group
Health insurance company UnitedHealth Group (UNH 1.35%) is one of the world's largest healthcare businesses, providing health insurance and other care services to more than 146 million people in the United States and around the world. Its insurance business is complemented by Optum, which provides healthcare products and services directly to consumers.
The company has done $285 billion in revenue over the past 12 months, and its $465 billion market cap makes it a core pillar of the healthcare industry as we know it. U.S. healthcare spending hit $4.1 trillion in 2020, increasing 9.7% over the previous year. It's likely that a lot of this growth was driven by COVID-19, but the prevalence of chronic conditions amid the population could drive growth for years to come. They account for more than $1 trillion in spending alone.
UnitedHealth Group just wrapped up its fiscal 2021 year, growing revenue 12% year over year, driven by double-digit growth in both of its insurance and Optum business segments. Analysts expect EPS to grow an average of nearly 15% annually over the next three to five years, giving investors all the ammunition they need to double their money over the next decade if this is accurate. The company's dividend offers a yield of 1.1% as an added bonus for shareholders.
