3 Healthcare Stocks That Should Be on Every Investor’s Radar This Fall
As of September 19, S&P 500 healthcare stocks were down 3.2% for the year. Of the 11 sectors, its year to date (YTD) performance is the second worst only behind utilities.
Over the past decade, the Health Care Select Sector SPDR Fund (NYSEARCA:XLV) has fared better, averaging an annualized return of 12.23%, putting it in third spot.
However, the tech-heavy index has a weighting of 27.13%, or double that of healthcare. The XLV trails the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) by 48 basis points.
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Nonetheless, if you can only have one sector ETF in your investment portfolio, it should be healthcare. No other sector has such a profound effect on the overall financial well-being of a country. So let’s explore three healthcare stocks to buy now.
BioTechne (TECH)
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BioTechne (NASDAQ:TECH) is a small holding in XLV with just a 0.22% weighting.
Barron’s recently produced an article about six healthcare stocks in the S&P 500 with buy ratings, with more than 70% of the analysts covering the stocks. BioTechne was one of the six. It has 11 out of 13 buy ratings, according to FactSet.
The biotech company’s stock is down 14% YTD, about 4x worse than the S&P 500 healthcare stocks. Volatility comes with the territory. The company’s products help drive and accelerate drug development. While not as glamorous as the next big cancer drug, they’re vital to the process.
Financially, its balance sheet, income, and cash flow ($200 million annually) statements look healthy. It has only $350 million in long-term debt, which is less than 4% of its market cap. In fiscal 2023, its revenue and operating income didn’t grow much, but its gross and operating margins are high.
Dexcom (DXCM)
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Dexcom (NYSE:DXCM), with a market cap 3x BioTechne’s, has an XLV weighting of 0.73%. The stock has lost 23% since last November.
The maker of glucose monitoring systems was growing its international business in the latest quarter accounting for 29% of its $871 million in revenue. This was 200 basis points higher than a year ago.
It has experienced a 25% increase in sales and a 66% increase in operating income, and trades holds at 12.4x sales, considerably less than its multiple last fall.
According to MarketWatch, of the 23 analysts that cover it, 21 rate it overweight or an outright buy, with a $150 target price.
HCA Healthcare (HCA)
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HCA Healthcare (NYSE:HCA) has the largest weighting of this trio at 1.04%, proving the best performance over the past year, up nearly 28%. And, over the past five years, it’s got the second-best return, up 90%.
The operator of hospitals, ambulatory care sites, surgery centers, and other medical facilities announced on Aug. 29 that it partnered with Google Cloud to bring generative artificial intelligence (AI) into its hospitals.
“Generative AI and other new technologies are helping us transform the ways teams interact, create better workflows, and have the right team, at the right time, empowered with the information they need for our patients,” said Michael J. Schlosser, MD, MBA, FAANS, SVP, Care Transformation and Innovation, HCA Healthcare.
CEO Sam Hazen recently appeared at a healthcare conference in Nashville, where he discussed the company’s desire to push further into research. For 2023, it expects revenues of at least $63.25 billion and $12.3 billion in adjusted EBITDA. Admissions, revenues, and free cash flow are all up, yet its valuation is quite reasonable, suggesting HCA will continue moving higher in 2024.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
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