The Top 3 Healthcare Stocks to Buy in March 2024
Stock markets are reaching new highs and exuberance is in the air. For value investors, this might seem like a perplexing time.
However, there are still bargains to be found… outside of the technology sector. With these three top healthcare stocks to buy, for example, there are high quality companies still selling at affordable prices. If and when the market enthusiasm spreads into the healthcare sector, these three stocks should surge.
Johnson & Johnson (JNJ)
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Johnson & Johnson (NYSE:JNJ) is one of the world’s leading healthcare companies. In business for 138 years, J&J has built a tremendous track record for healthcare innovation and sound financial practices.
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JNJ stock makes for a perfect defensive pick. People still buy medical devices and drugs regardless of the broader economic climate. With the stock market hitting ever-higher highs, the odds of a serious correction are mounting.
JNJ stock, by contrast, has barely rallied over the past four years and sells for just 15 times forward earnings. It is a Dividend Aristocrat and offers a healthy 3.0% dividend yield. It can afford these generous dividends as the company generates more than $15 billion annually in free cash flow and has a rock solid balance sheet.
This sets it up well to be a safe harbor pick that health care investors can take comfort in owning if and when another bear market hits.
Charles River Laboratories (CRL)
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Charles River Laboratories (NYSE:CRL) has built a unique business. The Boston-based life sciences firm was founded in 1947 to provides the lab specimens — such as mice, rats and monkeys — for clinical trials on pharmaceutical drugs.
As the biotech industry has blossomed, Charles River’s business has grown tremendously. Drug safety is a huge market. The Charles River of today isn’t just lab rats but also software and consulting functions along with providing clinical research support for pharma and biotech companies.
All told, Charles River was involved in the development of an astounding 80% of all drugs which received FDA approval over the past few years. In other words, Charles River essentially gets to charge a small tax on virtually all new pharmaceutical drugs that make it to market.
Charles River shares slumped over the past two years as COVID-19 related testing and development revenues faded away. However, the company is back on the upswing; it just delivered a strong earnings report and the company’s outlook is improving. Analysts foresee the clinical research market returning to growth later this year.
The stock recently hit 52-week highs but is still at a reasonable 24 times forward earnings. That’s a fine price given the firm’s track record of double-digit annualized earnings growth over the long haul.
Medtronic (MDT)
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Medtronic (NYSE:MDT) is one of the world’s largest medical device companies with annual revenues of more than $30 billion.
Like Johnson & Johnson, Medtronic investors have not had much to cheer about recently. Incredibly enough, MDT stock is actually down slightly over the past five years. Compared to the broader S&P 500, that’s a significant level of underperformance.
Initially, this lag made sense. Many people delayed elective surgeries during the pandemic. And supply chain issues caused medical device makers to struggle to keep inventory supplied in some product categories.
However, industry conditions have largely normalized now, yet MDT shares are still in their slump. That should be about to change, however.
The company’s recent fiscal year Q3 results were well ahead of expectations. Not only that, but the company posted improving numbers across all business segments. Additionally, it raised guidance for 2024, showing that the current turnaround has momentum. That makes MDT stock a bargain at less than 17 times forward earnings.
On the date of publication, Ian Bezek held a long position in JNJ, CRL, and MDT stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.
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