If you’re worried that the market is getting a bit too rich, or if you’re simply an income-oriented investor who prefers stability and dividends to risky small caps, then healthcare is the right sector for you.
Many companies in the healthcare sector offer a great combination of stability and growth.
The stability comes from reasonable valuations that are below the current market norms, with a forward price-to-earnings ratio of about 16 for the typical S&P 500 stock. And the growth comes from a demographic shift where aging baby boomers will naturally demand more care and the Affordable Care Act (aka Obamacare) is putting more “customers” on the rolls of insurance companies with the ability to seek treatment.
There are admittedly some high-risk sectors of healthcare, such as development-stage biotechs, or low-growth segments such as aging pharmaceutical giants who are seeing their product pipelines run dry.
But this list of five solid healthcare plays features companies in the sweet spot between low risk and high return. Here they are, in no particular order: