Please ensure Javascript is enabled for purposes of website accessibility

9 Health-Care Stocks to Defend Your Portfolio

By Jennifer Schonberger - Updated Apr 5, 2017 at 8:07PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Defensive plays for a recession.

Put on your helmets! It's time to bring in the defense.

The National Bureau of Economic Research disseminated the glum news on Monday that investors knew in the back of their minds: The U.S. is in a recession and has been since payrolls peaked in December of 2007.

It's late in the game. We're in the fourth quarter, your portfolio is down, the clock is ticking and Mr. Market is playing hardball. No doubt you've tried to remain on the offense, but now the game rules have shifted to defense. The health-care sector is full of defensive plays, as many of these companies operate in recession-resistant industries. Just because the economy has fallen off a cliff, doesn't mean people are going to ignore their health problems.

Companies like Amgen (NASDAQ:AMGN) and Gilead Sciences (NASDAQ:GILD) in the biotech industry are examples of financially strong companies with promising pipelines that target large markets. What's more, the recession should have little impact on their businesses. Take Gilead, for example: According to one analyst, the company has one of the best HIV drug lines on the market. Those who have AIDS will continue to require Gilead's treatments, recession or no.

Another example is biopharmaceutical company Emergent BioSolutions (NYSE:EBS), which is best known for its BioThrax vaccine that treats anthrax. One of the company's biggest customers is the Federal Government. Emergent has secured over $850 million in contracts with the U.S. government for the delivery of over 33 million doses of BioThrax, securing strong revenue for the next three years.

To find winning companies, I used the Fool's CAPS screening tool, looking for companies that:

  • Operate in the health-care sector
  • Have posted a revenue growth rate of 5% or better for the past three years
  • Have a return on equity of 17% or greater to ensure efficiency
  • Have market caps of $500 million or greater
  • Have a current ratio of one or greater, to ensure liquidity
  • Were rated "outperform" by at least one analyst on Wall Street
  • Have CAPS ratings of four or five stars, the highest two from our CAPS community

In the first 20 months since we began our CAPS investment community, four- and five-star companies outperformed the market, with average annualized gains of 7% and 12%, respectively.

Company Name

Market Capitalization

Rev. Growth Rate (last 3 Years)

Return on Equity (TTM)

Current Ratio (mrq)

Amgen

$60.9 billion

6.4%

20.5%

3.2

China Medical Technologies (NASDAQ:CMED)

$513 million

61%

23.5%

2.6

Emergent BioSolutions

$707 million

20.6%

24.4%

2.9

Gilead Sciences

$42.0 billion

34.1%

44.3%

3.4

Intuitive Surgical (NASDAQ:ISRG)

$5.2 billion

51.3%

17.1%

4.4

Johnson & Johnson (NYSE:JNJ)

$159.0 billion

8.1%

27.6%

1.6

Meridian Biosciences

$940.6 million

14.4%

23.5%

6.2

Mindray Medical International (NYSE:MR)

$2.0 billion

44.4%

21.7%

2.2

Novartis

$107.8 billion

8%

23.9%

1.6

Source: Motley Fool CAPS. TTM = trailing 12 months; mrq = most recent quarter.

This is only a starting place. Prospective investors should pay careful attention to companies' respective businesses, position in the competitive landscape, and financial health. Also, be mindful of valuation, as many investors on Wall Street are aware of the promise that companies in the health-care sector hold in this environment.

Start padding your portfolio at Motley Fool CAPS today! Let the collective wisdom of our 120,000 member-strong investment community help you make better investing decisions.

For related Foolishness:

Mindray Medical and Intuitive Surgical are both Motley Fool Rule Breakers picks and the Fool owns shares of Mindray. Johnson & Johnson is an Income Investor recommendation. Try either newsletter free for 30 days.

Jennifer Schonberger owns shares of Johnson & Johnson, but does not own shares of any of the other companies mentioned in this article. The Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Johnson & Johnson Stock Quote
Johnson & Johnson
JNJ
$171.11 (-0.40%) $0.68
Intuitive Surgical, Inc. Stock Quote
Intuitive Surgical, Inc.
ISRG
$240.32 (-0.88%) $-2.14
Gilead Sciences, Inc. Stock Quote
Gilead Sciences, Inc.
GILD
$61.09 (-1.32%) $0.82
Amgen Inc. Stock Quote
Amgen Inc.
AMGN
$246.25 (-0.30%) $0.73
Mindray Medical International Limited Stock Quote
Mindray Medical International Limited
MR
Emergent BioSolutions Inc. Stock Quote
Emergent BioSolutions Inc.
EBS
$31.65 (-3.33%) $-1.09

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.