While the stock market may feel topsy-turvy at the moment, investors who train their focus on strong and innovative businesses can maintain a steady course. Some industries manage macroeconomic uncertainty better than others.
In particular, the healthcare industry tends to be one of the most non-cyclical areas in which to invest, simply because the products and services of companies trading in this sector tend to remain in demand no matter what else is happening in the world or with the economy.
On that note, if you're looking to add more healthcare stocks to your portfolio this month, here are two names to consider for your list of potential buys.
1. Teladoc Health
Most investors have heard of Teladoc Health (TDOC 0.70%) by now, and you're not alone if you've felt dismayed by the healthcare stock's stunning drop over the past year. The stock has slumped more than 80% over the trailing 12 months compared with the S&P 500's decline of 16%.
There are several reasons for the beating that shares of Teladoc have taken. For one, there's been the broader drawdown of pandemic favorites as the world has reopened and some investors have feared that the relevance of these stocks represent trends from a bygone era.
On top of that, Teladoc made two major acquisitions during the pandemic: InTouch Health and fellow telehealth giant Livongo. While both of these acquisitions significantly expanded the scope of Teladoc's services and platform, the company faced notable investor backlash when it issued respective write-downs of $6.6 billion and $3 billion for its Livongo acquisition in the first half of this year. In short, it probably overpaid for Livongo.
However, as is the case with any investment, a few quarters alone shouldn't cause you to hit the buy or sell button. Looking beyond these write-downs and the volatility afflicting growth stocks as a whole, there are some notable reasons to be bullish about Teladoc's business moving forward.
First, it's still the key figure in the global telehealth market. This is a space estimated to reach a valuation of nearly $400 billion by the year 2030. While there are certainly other competitors in this space, they haven't managed to snag the sizable footprint that Teladoc continues to maintain.
On top of that, Teladoc is already showing signs of recovery from the impact of the losses it tacked on from its pandemic-era acquisitions. The most recent quarter saw Teladoc grow its revenue by 17% from the year-ago period. Moreover, its net loss shrunk to $73.5 million from $3.1 billion in the prior quarter and $84.3 million in the year-ago period. Looking at a much broader window, over the trailing five years, the company has grown its annual revenue and operating cash flow by respective percentages of 267% and 550%.
For investors with a healthy risk appetite and the patience to hold onto Teladoc through upcoming market cycles, the durable tailwinds driving the telehealth giant's business can translate to strong portfolio returns over the long haul.
2. Johnson & Johnson
When it comes to investing in a bear market environment, there are generally two types of companies that investors gravitate toward. There are the riskier, more growth-oriented investments that have been hit harder amid market volatility, such as the previous stock.
Then there are the steady-growth, value-oriented stocks that can provide a safe harbor amid the storm. Johnson & Johnson (JNJ 0.09%) falls into this latter category.
With a company history that spans nearly 140 years, and a broad portfolio of products that include everything from daily-use consumer products to surgical instruments to immunology and oncology drugs, Johnson & Johnson's diverse business model has translated to a history of successive revenue growth, profitability, and stable investor returns.
Over the trailing decade, its stock has yielded a total return of well over 200% for investors. As the icing on the cake, the company pays a dividend that yields 2.6%, higher than that the 2% average for stocks in the S&P 500. And since Johnson & Johnson has increased its dividend every year for 60 years and counting, the company is also a seasoned member of the Dividend King club.
During the past 10 years, Johnson & Johnson's annual revenue has increased by 40% while its annual net income has surged 92%. Meanwhile, the company has grown its operating cash flow by more than 50% during that same 10-year period.
Even with the stock's upcoming split into two separate publicly traded -- and dividend-paying -- entities, the strength and non-cyclicality of Johnson & Johnson's businesses can continue to lend strong returns for long-term investors' portfolios for years to come.
