According to the Pew Research Center, roughly 10,000 baby boomers will turn 65 every day for the next 19 years. That simple statistic should ensure that demand for healthcare services will continue to rise over the coming decades. So, it makes a great deal of sense for investors to dedicate at least a portion of their portfolio to healthcare stocks. Many perceive the healthcare sector to be one that requires constant vigilance. But are there healthcare stocks that offer solid prospects without demanding constant attention?
To help answer that question, we asked our team of Motley Fool contributors to share a healthcare stock that they think doesn't require constant monitoring. Read on to see which stocks they highlighted.
Brian Feroldi: I think Johnson & Johnson (JNJ -1.10%) is a great choice for investors who want to ride the healthcare wave with without feeling the need to babysit. One big reason I like Johnson & Johnson for investors who want to take a hands-off approach is the commanding market position it holds in the areas it competes in. Johnson & Johnson products hold the No. 1 or No. 2 market share position in 17 different categories, comprising about 70% of its total sales. That dominant market position gives its business a lot of predictability, and its products can be counted on to deliver results in good and bad economic times.
The company also has an amazing track record of sharing its wealth with investors. For 53 years straight Johnson & Johnson has increased its dividend -- a remarkable achievement -- and the odds look favorable that the trend will continue. Johnson & Johnson's pharmaceutical division looks particularly attractive -- the company counts 22 drugs either on the market or in late-stage clinical trials that hold billion-dollar annual sales potential. As its newly launched drugs continue to ramp up and its late-stage products find their way to pharmacy shelves, the company's profits should continue to move higher. That should make it easy for the company to continue to raise its dividend and repurchase shares.
Johnson & Johnson isn't an expensive stock right now, either. Shares are currently trading for about 15 times estimated 2016 earnings per share, and the stock offers up a 3% dividend yield. All told, Johnson & Johnson is an easy way for investors to add low-risk healthcare exposure to their portfolio.
Selena Maranjian: It's obvious why you might want to invest in the healthcare sector: With our population growing and aging, and many diseases and conditions requiring treatment, it's assured of plenty of demand. Obamacare is generally a plus, too, bringing millions of new patients into health plans. If you're looking for a healthcare investment you won't have to watch too closely, consider the iShares Nasdaq Biotechnology ETF (IBB 0.94%). It's an exchange-traded fund, which is essentially an index fund that trades like a stock, and it's one focused on the biotechnology sector. As such, it's fairly volatile for an ETF, but much less so than many individual stocks in the sector.
If you invest in the iShares Nasdaq Biotechnology ETF, you will immediately be invested in close to 200 biotechnology stocks, actively working to develop new drugs and sell approved ones. Presto -- immediate diversification. But there's significant focus, too, with about a third of the fund's assets resting in four of the biggest biotechs around: Biogen, Celgene, Amgen, and Gilead Sciences. The ETF is a leader in its category, with impressive annual average returns of 24% over the past five years and 13% over the past 10. It's also appealingly priced, featuring an expense ratio (annual fee) of 0.48%, less than many of its peers and far less than most managed stock mutual funds.
This single investment gives you a lot. Just one example is Amgen, with a rich pipeline featuring dozens of drugs in development -- about a dozen of which are in phase 3 testing -- and many promising biosimilar drugs in development, too. Celgene's pipeline features dozens of drugs tackling tumors, leukemia, lymphoma, multiple myeloma, and much more. Biotech companies have been beaten down lately, making this ETF particularly attractive at recent levels.
Sean Williams: With the stock market beginning the year with substantial losses, the last thing investors want to do is sit on the edge of their seat worrying about each and every stock in their portfolio. If you're one of those investors who'd prefer to sleep well at night, I'd suggest taking a closer look at HCP (PEAK 2.09%).
HCP is actually a real estate investment trust, or REIT, but it specializes in healthcare-related assets. The company purchases buildings tied to the healthcare industry, such as hospitals, life science offices, skilled nursing and senior care facilities, and medical offices, and leases them out to remain profitable. As of the third quarter, HCP's real estate portfolio consisted of $12.25 billion in net real estate assets, composed of building and land value minus depreciation and amortization.
The reason HCP's business model is so exciting is twofold. First, people can't control when they do or don't get sick. This means that the demand for medical care is generally inelastic, which bodes well for HCP's lease-pricing power over the long run. It also means a recession is no reason to be worried about HCP. The other component here is we have countless serious diseases that have no cure, leading to the belief that there's a growing need for hospitals, skilled nursing, and life science facilities.
HCP's allure also falls back on the fact that it's the only REIT that's also a dividend aristocrat -- one of a group of just over 50 publicly traded companies that've raised their dividend in each of the past 25 years. In HCP's case, it's boosted its payout for 30 consecutive years. Its current payout of 6.1% nearly triples up the average yield of the S&P 500.
HCP is a company that'll likely allow even the most conservative investor to sleep well at night.