Top Healthcare Stocks to Watch in 2021

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The pandemic flipped the healthcare market upside down, as the industry raced to deal with the spread of COVID-19.

Now, the global healthcare industry is faced with a variety of hurdles, such as moving clinical trials forward and getting vaccines distributed, while also tracking new issues that have arisen during the pandemic — like widespread weight gain, mental health disorders like depression, anxiety, addictions and, of course, the lingering COVID-19 virus itself. 

At the same time, the industry — like all other verticals — is going through a period of intense digital transformation. The pandemic greatly accelerated the use of cloud technologies and connected devices as many providers shifted to telehealth and remote work. 

To give you a sense of just how quickly technology is speeding up in the healthcare industry, a study from PwC found that 73% of provider executives said their organizations are automating their physicians’ administrative tasks. What’s more, 91% of health plan executives said improving the clinician experience is a priority for their organizations for 2021. And 74% of health executives said their organizations would invest more in predictive modeling in 2021. 

As such, investors would be wise to look beyond traditional healthcare stocks and into the underlying providers that are serving the industry with data, analytics, artificial intelligence, connectivity, and communication and collaboration software. 

From cannabis and pharma companies to healthcare services providers and companies combating the coronavirus, here are some of the best healthcare stocks to invest in this year.

Key healthcare stocks to monitor for 2021

  1. Pfizer
  2. Johnson & Johnson
  3. Intuitive Surgical
  4. UnitedHealth Group
  5. Moderna
  6. Vertex Pharmaceuticals
  7. Teladoc Health
  8. CVS Health
  9. DaVita
  10. Stryker
  11. Amgen

1. Pfizer (NYSE: PFE)

Pfizer is one of the biggest companies competing in the COVID-19 vaccine market right now. The company recently produced a vaccine with BioNTech and received Emergency Use Authorization (EUA) by the Food and Drug Administration (FDA). 

2. Johnson & Johnson (NYSE: JNJ) 

Johnson & Johnson is another company that’s actively promoting a COVID-19 vaccine. According to the company, their vaccine is 66% effective against protecting against the virus. Like Pfizer, Johnson & Johnson is included in the Dow Jones Industrial Average (DJIA).

3. Intuitive Surgical (NASDAQ: ISRG) 

Intuitive Surgical is a leading robotic surgical system provider offering the da Vinci robotic surgical system. This is a company that’s poised for long-term, post-pandemic growth.

4. UnitedHealth Group (NYSE: UNH) 

UnitedHealth Group is the largest health insurer on the planet. For investors, the company offers a combination of stability along with a healthy dividend yield. UNH is also one of the 30 companies in the DJIA.

5. Moderna (NASDAQ: MRNA) 

Moderna is also at the forefront of the vaccine conversation, having recently brought one to market. The company is a good long-term buy for the work they’re doing in preventative HIV vaccines, Nipah virus, and seasonal flu.

6. Vertex Pharmaceuticals (NASDAQ: VRTX)

Vertex Pharmaceuticals is making major strides in the treatment of cystic fibrosis. To date, Vertex is the only company that has developed the four drugs used to target the gene mutations caused by cystic fibrosis. The most effective one is Trikafta. This is another company with excellent long-term potential.

7. Teladoc Health (NYSE: TDOC)

Teladoc Health provides a variety of services including treatment recommendations and diagnoses. The company also prescribes medication for medical problems using video consultations. This is a company to keep on your radar even as the pandemic ends and practices return to normal.

8. CVS Health (NYSE: CVS)

CVS underperformed in 2020. But the company has a solid long-term outlook and a healthy dividend of 2.9% at the time of writing. The company’s stability and its widespread footprint make them a company to keep on your radar in 2021. 

9. DaVita (NYSE: DVA)

DaVita is the largest dialysis provider in America. It’s also heavily owned by Warren Buffett’s Berkshire Hathaway group, which controls more than 32% of the company. The company had a solid run in 2020. All signs indicate this growth will continue in 2021 and beyond.

10. Stryker (NYSE: SYK) 

Stryker is a leading medical device and robotic systems developer, with a focus on spinal procedures and orthopedics. As one of the world’s top medical technology companies, Stryker is a company you can feel good about trusting this year and for the foreseeable future.

11.  Amgen (NASDAQ: AMGN)

Since launching in 1980, Amgen has emerged as one of the top companies in the biopharmaceutical space. The company offers drugs across a variety of different areas, including bone health, inflammation, among others. Amgen has more than 150 clinical trials for drugs in motion and a bright future ahead making them a green light for long-term investing.

Types of healthcare stocks to invest in

The healthcare industry is massive, with many different sectors and countless companies to consider. As a result, it can be very difficult for the average investor to know where to look. 

With that in mind, here are some specific areas to help narrow down your focus in the healthcare sector. 

Drugs 

Drug companies are at the forefront of the fight to end COVD-19. However, while COVID-19 has captured the headlines as our most pressing health concern, it’s obviously not the only disease that’s being battled today. Drug companies are continuing the fight against afflictions like cancer, fibromyalgia, multiple sclerosis, and diabetes, to name just a few examples. 

In this category, there are biotech companies that use live organisms to develop drugs and pharmaceutical companies that use chemicals. 

If you’re interested in investing in this space, check out the tickers for Biogen (NASDAQ: BIIB), Amneal Pharmaceuticals (NYSE: AMRX), and AbbVie (NYSE: ABBV).

Marijuana companies 

Many investors are also pumping money into marijuana stocks. This market took off considerably in 2020 and further growth is expected for 2021 — especially if the Biden administration moves forward with federal marijuana decriminalization or legalization. 

Two marijuana stocks to keep your eye on in 2021 include Valens (OTC: VLNCF) and Columbia Care (OTC: CCHWF). Active marijuana ETFs include the Alternative Harvest ETF (NYSE: MJ) and the Pure Cannabis ETF (NYSE: YOLO). While the cannabis market is expected to grow, many companies in the space remain small and risky. Owning an ETF can help you spread your risk across the entire industry’s growth rather than a single company. 

Medical devices 

In addition to drug companies, you should also consider looking into medical device providers. These providers make everything from face masks and gloves to needles and advanced surgical systems. According to one study, the global medical devices market is projected to reach $671.5 billion by 2027.

Key stocks in the medical devices market to track include Abbott Labs (NYSE: ABT), Johnson & Johnson (NYSE: JNJ), and Medtronic (NYSE: MDT).

Learn more:

Healthcare providers 

Healthcare providers include hospitals, practices, long-term care facilities, emergency response organizations, in-home nursing providers, and rehabilitation centers. 

Top healthcare providers to look into for 2021 include LHC Group (NASDAQ: LHCG) and HCA Healthcare (NYSE: HCA). 

Payer stocks

The payer category refers to all insurance and pharmacy benefits managers (PBMs), which administer drug benefits and health plans for companies. 

Top payer stocks for 2021 include Humana Group (NYSE: HUM) and Anthem (NYSE: ANTM), both of which are dividend stocks and a vital part of the healthcare system.

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Look for signs of growth 

When looking into different healthcare companies, pay less attention to what a healthcare company has done in the past and focus on their future growth prospects instead. 

For example, just because a company has been successful doesn’t guarantee that they are still relevant — or that they will be down the road. Look for signs that a company could be displaced by a competitor.

Also, keep in mind that if you’re planning to buy a stock because of trial results that you read about in the headlines, you’re probably late to the game. Institutional investors are keeping a closer eye on companies’ progress than you are and they’re acting accordingly. That doesn’t mean it’s a bad investment — the company might have a healthy pipeline and great prospects for years to come, but don’t buy based on the latest news. 

Remember that investing is not about buying and selling quickly. Think long-term and put your money into healthcare companies you anticipate will be around for decades.

As the saying goes, the best stocks are the ones you never have to worry about trading.

Look for companies that pay dividends 

Check to see whether a company pays dividends to shareholders. This is a way of earning extra money from a stock in addition to capital appreciation. According to analysis, dividends accounted for more than 40 percent of the S&P 500’s total return between 1930 and 2012.

In addition to checking whether a company offers dividends, you’ll also want to investigate why they are choosing to do so — and how much the dividend yield is. 

Another important thing to consider is the payout ratio, which lets you know how much of an organization’s cash is being used to pay for the dividend. 

Invest in funds 

Picking stocks is hard enough. Picking the right ones in a competitive and fast-moving industry like healthcare is even harder. 

One strategy you can use to invest in healthcare stocks is to buy exchange-traded funds (ETFs) or index funds, which are baskets of securities. Instead of putting all your money into one company, you can spread it out over several different ones. Investing in funds can lower risk and provide broader market exposure.

Some common funds to consider include the Vanguard Healthcare ETF and the iShares Nasdaq Biotechnology ETF.

Follow what the experts are saying

There’s no shame in asking for help when buying healthcare stocks. Instead of guessing, sign up for a service like The Motley Fool’s Stock Advisor service for advice on what stocks you should be investing in along with supporting data. (Note that Millennial Money is now owned by The Motley Fool, but I was a fan long before the acquisition.)

Read blogs, listen to podcasts, and stay informed with the latest updates and insights from across the healthcare market. The more informed you are as an investor, the better off you will be. 

Frequently Asked Questions

What do biotech companies do?

Biotech companies bring together technology and biology to create drugs that treat various medical conditions. 

The future is bright for the biotech industry, as recent advancements are making it possible to treat a variety of conditions that were previously untreatable. 

If you’re thinking of investing in biotech companies, just make sure to research first to make sure your target organization is profitable or has a strong chance of becoming successful down the line. Look for examples of products, services, or research that could lead to profits. 

Should I invest in the healthcare industry?

Don’t just invest in the healthcare industry. Get specific about what you want to invest in the industry.

Within the scope of healthcare, there are many different companies that are all focused on different things. Not all companies are committed to growth and profiting. 

To invest in healthcare, start by narrowing down a particular area like drug companies or medical device providers and drill down from there. 

How will the Biden administration impact the stock market?

As an investor, you shouldn’t pay any mind to how the Biden administration, or any administration, will affect the stock market. The fact is that the economy and the stock market are two completely different things. Making decisions based on short- to medium-term projections will only harm your portfolio in the long run.

Focus on building a portfolio that is highly diversified, with a mix of stocks, bonds, funds, real estate, and alternative assets. Think long term and invest in stable companies that will profit regardless of bearish or bullish trends. 

By taking this approach, you will avoid losing money by making emotional trades. Plus, it’s a lot less stressful.

If you’re concerned about your inability to avoid making emotional trades, consider using a robo advisor to oversee account management.

Are healthcare stocks good for retirement accounts?

It largely depends on the types of stocks that you are considering. 

If you’re a young investor who is planning ahead for retirement, it’s a good idea to fill your portfolio with equities to drive growth. At the same time, you want to build a stable core to combat volatility.

The healthcare sector is incredibly varied and there are stocks and funds to fit any type of investment strategy. Start by figuring out your risk tolerance and outline your long-term financial goals. Then invest in companies that align with your vision. 

The Bottom Line 

The healthcare industry is experiencing unprecedented change and growth. That being the case, all investors should be looking for ways to tap into it in 2021. Opportunities abound, as providers are implementing new technologies and spending money to cure diseases, help patients, and streamline care. 

As a word to the wise, the industry is so vast that it can be hard to narrow down the best companies in the field. Start by breaking down the healthcare sector into various subsets like drugs or medical device providers and then focus on finding the best companies in those particular areas. 

It’s also a good idea to look for low-cost funds that can provide broad market exposure to investors at a low cost. By spreading your risk around, you can capitalize on the transformative innovation that is occurring in the healthcare space without having to put all your eggs in one basket. Good luck!

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