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 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.
[Read: The 10 Most Anticipated IPOs of 2017.]
Here’s a smattering of the best health care stocks on Wall Street today.
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 nearly $160 billion, combined with its 1.5 percent dividend, make it a relatively safe pick — and its 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 Donald Trump willing to take another stab at repeal and replace, 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 United States. BKD is by no means a dynamic growth company, and in fact revenue is expected to fall this year.
But on a longer-term basis, BKD seems primed to remain eternally relevant. Due to the expected revenue slump, Brookdale shares trade for less than 9 times forward earnings. In late March Jefferies upgraded the stock, saying it was trading below net asset value and that the company was a potential acquisition target.
[See: The 25 Best Blue-Chip Stocks to Buy for 2017.]
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, didn’t just rise in 2016 — sales rose 20 percent on the year — it’s rising at an accelerating rate, up from 18 percent growth in 2015. Shares trade for less than 15 times forward earnings, even after a solid post-election rally.
Analysts expect revenue and earnings per share growth of about 18 percent and 21 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 eclipsed 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 2.6 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 was recently approved for two indications in the U.S. and is in Phase III trials for three others; the drug could turn out to 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.
[See: 7 of the Best Stocks to Buy for 2017.]
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
