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10 Healthcare Stocks for the New Year

Author: Rachel Warren | January 20, 2021

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Healthcare stocks are a great investment for 2021

2020 was quite the year for healthcare stocks. With household names banding together in the race to develop safe and effective COVID-19 vaccines and treatments, the healthcare industry was one of the most popular sectors to invest in last year.

The top healthcare stocks remain solid long-term investments to buy and hold in your portfolio for the next decade or longer, regardless of what the market holds in the next few months. If you want to invest in healthcare in the new year, these are 10 companies from all corners of this lucrative field that you should consider for your list of buys.

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1. Teladoc Health

Telemedicine is an extremely fast-growing sector of the healthcare industry, and Teladoc Health (NYSE: TDOC) is by far the most prominent leader in this space. Although the COVID-19 pandemic has certainly brought more users to Teladoc’s platform, the services it provides are becoming an increasingly important fixture in today’s healthcare landscape.

Shares of the company have grown by more than 1,200% over the past five years, with the most noticeable streak of growth occurring during 2020. Last year, shares of the company spiked more than 100%. Teladoc reported 109% revenue growth in the third quarter, and 79% revenue growth during the first nine months of 2020 compared with the same period the prior year.

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2. Pfizer

On Dec. 11, the COVID-19 vaccine that Pfizer (NYSE: PFE) developed with its German partner, BioNTech (NASDAQ: BNTX), became the very first to win an emergency use authorization from the U.S. Food and Drug Administration after phase 3 trial data showed it to be 95% effective. Pfizer has said that it intends to distribute as many as 1.3 billion doses of its vaccine by the end of this year, with a significant portion of those doses allotted to the U.S.

Pfizer’s COVID-19 vaccine will undoubtedly be a blockbuster for the company, but the pharmaceutical giant has plenty of other growth prospects up its sleeve. The company has a thriving biopharma segment (this division grew by 4% in the third quarter) and boasts a number of blockbuster drugs in its portfolio including Ibrance and Eliquis. Pfizer also happens to be a top dividend stock, and its 4.3% yield far exceeds that of the average stock on the S&P 500.

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3. Johnson & Johnson

Another top contender in the race to find a coronavirus cure, Johnson & Johnson (NYSE: JNJ) also has plenty of star power to offer investors outside of its current vaccine hype.

The company’s balance sheet faced some headwinds last year in line with the tumbling economy, but it closed the third quarter with 2% sales growth and astounding earnings-per-share (EPS) growth of more than 100%. Johnson & Johnson’s consumer health and pharmaceutical segments both experienced single-digit sales increases during the third quarter, at 3% and 5%, respectively.

Investors and the world are waiting with bated breath to find out whether Johnson & Johnson’s COVID-19 vaccine (developed by its subsidiary Janssen Pharmaceuticals) is safe and effective. The vaccine is being studied as both a single-dose and a two-dose treatment course in two concurrent phase 3 trials, and results from the former study are expected to be released before the end of January. The company also recently released positive interim data about the single-dose vaccine candidate from the phase 1/2a trial, saying that it “provided an immune response that lasted for at least 71 days” and “was generally well-tolerated across all study participants.”

Another reason that Johnson & Johnson is a compelling healthcare play is its dividend. The company is a Dividend King and has raised its dividend every year for nearly 60 years in a row. With a yield of 2.5% based on current share prices, Johnson & Johnson is a solid dividend stock to buy for slow but steady portfolio growth.

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4. Vertex Pharmaceuticals

Vertex Pharmaceuticals (NASDAQ: VRTX) has a relatively small but extremely profitable portfolio of rare disease drugs. At the time of this writing, all of Vertex’s approved drugs are medicines for cystic fibrosis.

In the third quarter, the company grew its product revenue 62% year over year. Its two top-selling drugs in this quarter were Trikafta and Orkambi, which amassed product revenues of $960 million and $260 million, respectively, during the three-month period alone.

The cystic fibrosis therapeutics market is projected to grow to a worldwide valuation of $14 billion by 2025, according to Grand View Research. Even with its current portfolio containing just a handful of approved therapies, Vertex’s substantial market presence has enabled it to deliver astounding balance sheet growth despite economic uncertainties. Trikafta has certainly been a major factor in Vertex’s continued success, as the therapeutic is approved to treat approximately 90% of all individuals living with cystic fibrosis.

Vertex is also currently working on growing its portfolio of rare disease drugs outside the cystic fibrosis space, while seeking new indications for its existing medicines. The recession-resilient company is a great pick in the coronavirus stock market, as well as an attractive buy for the long-term investment portfolio.

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5. Intuitive Surgical

Medical robotics company Intuitive Surgical (NASDAQ: ISRG) has seen its shares swell 30% over the trailing 12 months. Although the company shipped 29% fewer of its flagship da Vinci Surgical System during the third quarter than in the year-ago period, the number of medical procedures performed around the globe that utilized the system grew 7% in the three-month stretch. Consequently, Intuitive Surgical’s revenue declined by just 4% during the quarter.

Management released preliminary fourth-quarter financial results on Jan. 13, reporting that “worldwide da Vinci procedures increased approximately 6% compared with the fourth quarter of 2019.” They also said that “preliminary fourth quarter 2020 revenue of approximately $1.33 billion increased by 4%” from the year-ago period.

The products that Intuitive Surgical makes will continue to be an essential aspect of medical procedures worldwide long after the coronavirus pandemic has passed, so short-term revenue declines shouldn’t concern shareholders too much. And the company already seems to be on the road to recovery. Investors who don’t mind some balance sheet volatility in the coming months can find compelling upside potential in this large-cap company.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

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6. Fulgent Genetics

Fulgent Genetics (NASDAQ: FLGT) continues to lead the way in the realm of gene-based diagnostic products, with a portfolio ranging from known mutation tests to hereditary cancer tests to tumor profiling tools. The company now boasts several COVID-19 tests in its product portfolio as well, including a molecular test and an antibody test.

In the third quarter, Fulgent Genetics reported mind-blowing year-over-year revenue growth of nearly 900%, while it experienced nearly 5,000% growth in terms of billable tests delivered during that period. Investors have been flocking to buy up shares of the company, and the stock has gained roughly 450% over the past 12-month period.

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7. UnitedHealth Group

As the largest health insurance company in both the U.S. and the world, UnitedHealth Group (NYSE: UNH) continued to deliver solid revenue growth during each of the first three quarters of the year 2020. In the third quarter, UnitedHealth Group’s revenue surged 8% year over year, spearheaded by 21% revenue growth from its subsidiary Optum.

Although UnitedHealth Group hasn’t escaped the long arm of the pandemic economy, its ability to keep delivering top-line growth reflects its overall resilience in the face of blistering market troubles. Another point in the company’s favor is its dividend, which yields 1.4% based on current share prices.

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Woman wearing hat and pink blouse holds cannabis leaf in field of marijuana plants.

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8. Green Thumb Industries

If you want to invest in the marijuana industry, few stocks can compete with the balance sheet growth that cannabis retailer and producer Green Thumb Industries (OTC: GTBIF) continues to deliver quarter after quarter. It’s no wonder that shares of the company have grown by nearly 200% over the past year.

In the first three quarters of 2020, Green Thumb delivered triple-digit top-line growth to the tune of 268%, 168%, and 131% year over year, respectively. It’s also worth pointing out that this level of growth isn’t anything new for the company. For instance, in 2019, the company grew its revenue by 246% compared with the previous year.

While some cannabis retailers have seen their revenues suffer during the pandemic, Green Thumb Industries was able to open several new stores throughout 2020. As marijuana legalization expands over the next few years, Green Thumb is well poised to continue generating stellar growth for its business and its shareholders.

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9. DexCom

DexCom (NASDAQ: DXCM) controls a notable slice of the worldwide continuous glucose monitoring (CGM) device market. If anything, demand for its flagship G6 CGM system has only increased during the pandemic. DexCom has supplied hospitals and other medical providers with its CGM devices so healthcare workers can remotely observe diabetes patients, who are at particular risk of experiencing life-threatening complications from COVID-19.

DexCom’s third-quarter revenue shot up double digits -- 26% from the year-ago period. When management released the company’s preliminary fourth-quarter and fiscal 2020 financial results on Jan. 11, it projected year-over-year revenue growth of 23% and 30%, respectively.

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10. Innovative Industrial Properties

Innovative Industrial Properties (NYSE: IIPR) is a real estate investment trust (REIT) that operates a portfolio of medical-use cannabis facilities. The REIT pays a dividend that yields approximately 2.6%, which makes it a great play for income-seeking investors.

Besides its dividend, Innovative Industrial Properties is an attractive investment in the cannabis space for its consistent top- and bottom- line growth. In the third quarter of 2020, the REIT grew its revenue nearly 200% year over year, while its net income surged by 205% from the comparable period in 2019.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Previous

Next

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Picking stocks for 2021

After the market mayhem of 2020, you’re not alone if you feel a bit antsy when picking stocks for the new year. The market continues to be fraught with contradictions as we near the end of January. Some stocks are wildly overpriced, while other stocks are trading at all-time lows.

The good news is, healthcare companies are some of the most recession-resilient stocks you can buy, largely due to the nature of their products and services that generate a certain level of constant demand.

And the modus operandi of long-term investors continues to be the most effective approach to investing in the stock market -- to fill your portfolio with companies that you’re willing to hold on to for several years or longer and to diversify with an assortment of stocks from a variety of sectors.

Rachel Warren has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Fulgent Genetics, Inc., Green Thumb Industries, Innovative Industrial Properties, Intuitive Surgical, and Teladoc Health. The Motley Fool recommends DexCom, Johnson & Johnson, UnitedHealth Group, and Vertex Pharmaceuticals and recommends the following options: long January 2022 $580 calls on Intuitive Surgical and short January 2022 $600 calls on Intuitive Surgical. The Motley Fool has a disclosure policy.

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