The past few months have been a roller-coaster ride for healthcare stocks. The continued Republican attempts to end Obamacare have thrown the sector for a loop — especially after the recent successful vote in the House.
But here’s the thing, no matter what happens with Obamacare or its replacement, demand for healthcare is only going to go higher thanks to our aging population. And prices for various drugs, therapies and needs are only going to increase further.
Which will be great for healthcare stocks over the long term.
Growing demand and higher long-term prices are of particular concern for retired investors. After all, those investors near or in retirement are going to be the ones needing more healthcare and at the most risk for rising prices. To that end, adding a dose of healthcare stocks is not only practical, but an essential piece of a portfolio.
With that in mind, here is one healthcare stock, one exchange-traded fund and one mutual fund to buy today.
Healthcare Stocks for Retirement: Ventas (VTR)
It stands to reason that if more people are demanding healthcare, it’ll take more hospitals to facilitate that care. Some of the best opportunities among healthcare stocks are those firms that own all the real estate related to hospitals, doctors offices, senior living facilities, etc. Ventas, Inc. (NYSE:VTR) is one of the elder statesmen of the healthcare real estate investment trusts (REITs).
Today, VTR owns nearly 1,300 properties including senior housing facilities, skilled nursing houses, acute care facilities and other medical-focused real estate. The real beauty for Ventas is that it doesn’t operate the facilities — it’s strictly an owner. That means it’s not responsible for all the hassles that come along with medicine nor is it subjected to the whims of Obamacare or its replacement.
It just collects a rent check. And getting those rent checks have been insanely profitable for VTR.
They’ve been pretty profitable for investors, too. Since 2001, Ventas has managed to grow its dividend by a compound annual growth rate (CAGR) of 8% per year. That’s inflation crushing, but also has managed to keep pace with broader increases in healthcare inflation. The firm currently yields 4.8%.
For retirement investors looking for a growing dividend from their healthcare stocks, VTR could be it.
Healthcare Stocks for Retirement: iShares Global Healthcare ETF (IXJ)
What do Novartis AG (ADR) (NYSE:NVS), Takeda and Sanofi SA (ADR) (NYSE:SNY) have in common? For one thing, they are three of the biggest drug manufacturers. Odds are you or a family member might take a drug produced by the trio. But what they share in common is that not one of them is based in the U.S.
We’re looking at healthcare stocks from Switzerland, Japan and France. And that shows just how global healthcare really is. Which is why the iShares S&P Global Healthcare Sect.(ETF) (NYSEARCA:IXJ) makes a great choice for investors.
IXJ tracks the S&P Global 1200 Healthcare Sector Index — which is a measure of the biggest healthcare stocks from around the world. Currently, about 67% of the portfolio is domiciled in the U.S., but the international stocks that are included are some of the largest and most influential on the sector. So IXJ’s 98 holdings are really the best of the best when it comes to healthcare stocks.
And that’s been measured in IXJ’s returns over the past few years. The ETF managed to post average annual returns of nearly 14% over the past five years. Part of that great return has been IXJ’s low expenses. The ETF only charges 0.47%, or $47 per $10,000 invested.
In the end, for investors looking for broad global healthcare exposure, IXJ is the ETF to own.
Healthcare Stocks for Retirement: Fidelity Select Health Care Portfolio (FSPHX)
For those investors looking for an active approach to owning healthcare stocks, the Fidelity Select Health Care Portfolio (MUTF:FSPHX) is a great choice. FSPHX’s goal is to outperform the popular and broad MSCI US Investable Market Health Care 25/50. It does that by eschewing some of the typical conventions.
For one thing, FSPHX owns a few international names such as Medtronic plc. Ordinary Shares (NYSE:MDT). Moreover, biotech features prominently in the mutual fund’s portfolio. Finally, the fund’s managers are willing to trade and shift the fund’s holdings as conditions change. This allows FSPHX to have a very high active share. That’s basically a measure of whether or not a fund’s managers are doing anything or actually just riding an index.
What that’s really done is allow FSPHX to return nearly 20% annually over the past five years and nearly 16% since its inception back in 1981. That’s a lot of years of beating the market and generating real returns.
For investors looking for an active approach to owning healthcare stocks, FSPHX is the top draw.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.