The S&P 500 continues to advance to new all-time highs, delivering total returns of 15.2% so far in 2025. However, much of this run stems from the "Magnificent Seven" and other massive technology stocks that have an outsize influence on the index. Meanwhile, many promising opportunities remain, despite the market's lofty-seeming status overall.
Today, I'll look at a couple of niche-leading healthcare stocks that haven't joined in on the market's current bull run yet, making them two of my favorite stocks to buy right now.
Zoetis: Leading the way in pet and livestock healthcare
Zoetis (ZTS -0.03%) is the top dog in pet and livestock healthcare, providing medicines, vaccines, diagnostics, and more for owners of eight animal species across the globe. Powered by its 17 blockbuster drugs that earn over $100 million annually, Zoetis is a well-diversified innovation machine.
However, since late 2021, the company's stock has declined 40% after hitting new all-time highs during the pet adoption boom amid the pandemic.
Making matters worse, Zoetis saw medicine sales from its most promising growth area -- osteoarthritis (OA) meds for dogs and cats -- decline by 4% year over year in its last quarter, prolonging the sell-off. This sales drop may seem alarming, as Zoetis just recently launched Librela (for dogs) and Solensia (for cats) in 2023 and 2022, respectively. Investors shouldn't panic just yet, though.
First, management estimates that there are over 18 million dogs with untreated OA in the United States, compared to just 1 million being helped by Librela. It is still very early innings for Zoetis in this market. Second, 75% of past or present Librela customers were "very or extremely satisfied" with the results they have seen, so it should have strong retention.
However, veterinarians are asking for more data from Zoetis to help them sell Librela and Solensia. Specifically, they want to be able to show higher rates of safety and efficacy for the company's monoclonal antibody offerings versus existing nonsteroidal anti-inflammatory drugs. Launching a phase 4 study and numerous other third-party analyses to hopefully highlight its superior outcomes, Zoetis plans to start releasing results by the fourth quarter and throughout 2026. Positive results from these studies could restart sales growth in the OA market as the company could more clearly present its value proposition to vets and pet owners alike.
Growing its sales by 8% annually since 2013 -- compared to the broader animal healthcare industry's growth of 5% -- I'm confident in Zoetis' ability to innovate and succeed over the long haul. As the company navigates through this temporary, shorter-term rough patch, Zoetis remains one of my favorite buys, trading at a decade-low price-to-earnings (P/E) ratio of 25.
UFP Technologies: Rapid growth in the medical device industry
UFP Technologies (UFPT -0.31%) is a contract development and manufacturing organization that works alongside 26 of the 30 largest medical original equipment manufacturers (OEMs). UFP partners with its OEM customers to provide:
- design, ideation, and engineering capabilities
- materials expertise, including access to certain exclusive medical-grade items
- certified precision manufacturing
- the ability to scale globally
The products it creates with its customers range from its largest business line, robot-assisted surgical (RAS) drapes, to medical-surgical beds, needleless injection port cleaners, and revascularization devices. Simply put, UFP dominates an array of unique niches in the medical device industry. Most importantly for investors, the vast majority of the company's sales come from single-use, single-patient products that provide recurring, predictable sales.
Acquiring 22 companies throughout its history, including nine in the last five years, UFP is a masterful serial acquirer, persistently looking to expand into adjacent verticals.
Powered by the double-digit growth rates expected from the RAS industry and new sales from acquisitions, management believes UFP will grow sales by 15% over the next three to five years. Following a decade that saw revenue and net income increase 16% and 30% annually, I'm not going to doubt their ability to do so.
A 72-bagger since 2000, UFP is one of my favorite stocks to buy right now at 23 times earnings as it grows alongside its juggernaut customers like Intuitive Surgical.
