Time for that annual portfolio checkup!
Health care stocks performed hellishly in 2016. With that in mind, investors counting on “reversion to the mean” — or those who simply believe in the long-term staying power of the sector — should now be looking for the best health care stocks to buy for 2017. While it’s true that it’s impossible to predict the direction of the market over the next 12 months, over the long run, stocks will continue to rise so long as the economy itself is growing. And while a diversified portfolio is a necessity for long-term investors, health care figures to be a singularly compelling sector as baby boomers enter their golden years and the world ages.
UnitedHealth Group (ticker: UNH)
UnitedHealth, the country’s largest health insurer, looks definitively to be one of the best health care stocks to buy for 2017. The company’s massive market capitalization of $140 billion, combined with its 1.7 percent dividend, make it a relatively safe pick — and it’s decreasing reliance on Obamacare makes it even safer. UNH was never truly sold on the merits of Obamacare, and waded in more cautiously than some of its peers. That proved to be a wise decision, and with President-elect Donald Trump’s impact on the Affordable Care Act still unknown, UNH’s decision to wind down its exposure even further seems like a good idea.
Stryker Corp. (SYK)
Stryker, another blue-chip stock with a modest dividend, should also be one of the best health care stocks to buy for 2017. The sprawling medical device company closed two big acquisitions in 2016: Sage Products, which mainly makes disposable products for the intensive care unit, and defibrillator company Physio-Control International. The two M&A deals massively boosted third-quarter results, and should continue to be an engine of growth going forward. Revenue grew 16.7 percent in constant currency in the third quarter, but without the purchases it would’ve grown by just 6.2 percent.
Brookdale Senior Living (BKD)
With the so-called “Graying of America” in full effect, senior living communities are more relevant than ever. And Brookdale, after its 2014 merger with Emeritus, is the largest senior living company in the U.S. BKD is by no means a dynamic growth company, and in fact its third-quarter results were somewhat disappointing. But on a longer-term basis, BKD seems primed to outperform at just 7.3 times forward earnings. Furthermore, three company insiders recently snapped up shares after the poor third quarter; the same three insiders bought stock in February at around $13 a share after a similar pullback. By April, shares were trading above $19 a pop.
Celgene Corp. (CELG)
Celgene, one of the major players in the biotech industry, is set to have another big year in 2017. Revenue from the company’s blockbuster product, the myeloma treatment Revlimid, isn’t just rising — sales were up 22 percent in the first three quarters of the year — it’s rising at an accelerating rate. Shares trade for less than 18 times forward earnings, even after a solid post-election rally. Analysts expect revenue and earnings per share growth of about 17 percent and 19 percent, respectively.
Zoetis (ZTS)
Zoetis is one of the more interesting health care stocks to buy for 2017, as its core focus is on animal health. Spun off from Pfizer (PFE) in 2013, Zoetis provides a range of vaccines, medicines, diagnostic tools and food additives for both livestock and “companion animals” like dogs, cats and horses. Revenue from its dogs and cats business line is set to eclipse the cattle segment for the first time ever in 2016; after all, people adore their pets and that’s not changing any time soon. In fact, it’s one of the most compelling reasons to buy ZTS: Even if there’s a recession during the Trump presidency, pets are fairly recession-proof.
Johnson & Johnson (JNJ)
Johnson & Johnson, despite being the most valuable health care company on the planet, is still a buy. It never hurts to own the Cadillac of blue-chip stocks. The highly diversified JNJ splits its revenue between the consumer goods, pharmaceutical and medical devices segments, and also pays a 2.8 percent dividend, which is a saving grace in today’s low-rate environment. Even with 10 drug treatments boasting run rates of $1 billion and up annually, Johnson & Johnson continues to find ways to grow, earn and reinvest. Its myeloma drug Darzalex is in clinical trials, and could eventually be a $5 billion cash cow in its prime.
iShares NASDAQ Biotechnology Index (ETF) (IBB)
Sure, IBB is technically an ETF, but it trades like a stock. Instead of assuming the company-specific risk that’s crushed investors in, say, Valeant Pharmaceuticals (VRX), IBB is a basket of all biotech and pharmaceutical stocks in the Nasdaq composite. If you’re truly searching for the best health care stocks to buy in 2017, you’ll want some exposure to the high-growth biotech industry, which hasn’t (yet) been well represented on this list. That’s precisely what IBB and its diversified portfolio of Nasdaq names gives you. Like JNJ, IBB isn’t just a standout in the health care sector — it might very well be one of the best stocks to buy in the entire market.
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7 of the Best Health Care Stocks to Buy for 2017 originally appeared on usnews.com
