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5 Healthcare Stocks to Buy

While this year has been a good one for the broad market — up 12.5% so far — what has been largely unappreciated is the big reason 2014 has been so strong.


Healthcare stocks have led the way, with a year-to-date gain of 25.2%. The next-nearest winning sector is (believe it or not) utilities, with a 21.0% advance this year.

So, which sector is currently holding the best stocks to buy for 2015? While it’s rare for one sector to lead two years in a row, there are several healthcare stocks out there right now that still have a ton of upside left to dole out to investors. Here are five of the best healthcare stocks to buy for the coming year.

Healthcare Stocks to Buy — Celgene Corporation (CELG)

celgene, healthcare stocksWith a trailing P/E of 60 and a forward-looking P/E of 23, it’s not like Celgene Corporation (CELG) is going to win any value awards. However, CELG stock is one of those few healthcare stocks where the strength of the company’s drug pipeline truly is worth the premium price newcomers may have to pay to own it now.

No, last week’s decision from European authorities regarding cancer therapy Revlimid wasn’t everything the company and owners of CELG stock were hoping for. It wasn’t a setback though, and it’s hardly the only opportunity Celgene has to look forward to.

Abraxane, for breast cancer, has shown outstanding success as a treatment for pre-surgery breast cancer patients, and the analyst community is really starting to warm up to the company’s pipeline. USB analyst Matthew Roden  recently noted:

“We are attending the ASH [American Society of Hematology] meeting, where data across multiple Celgene programs support higher numbers, in our view. We also had a chance to speak to management about ongoing development programs and continue to see unrecognized value across the pipeline. Bigger picture, we think Celgene’s competitive positioning in core markets is practically unmoveable, driving a 29% 5-year EPS CAGR.”

Healthcare Stocks to Buy — Healthequity (HQY)

healthequity-stock-hqy-185There’s little doubt that the advent of the Affordable Care Act has made an already-confusing healthcare delivery environment even more confusing for consumers. Simultaneously, the ACA has proven to be a relatively expensive burden for some employers.

Fortunately, Healthequity Inc. (HQY) has proved to be one of those healthcare stocks that’s a lifesaver on both fronts.

In simplest terms, Healthequity facilitates health savings accounts (HSAs) and flexible sensing accounts (FSAs), along with a variety of other types of savings accounts, helping employees and employers alike contain healthcare expenses.

If analysts are on target — and they likely are — the company will grow its top line by 31.6% next year, and increase its earnings from 20 cents per share of HQY stock this year to 27 cents in 2015.

Healthcare Stocks to Buy — Gilead Sciences (GILD)

Gilead Sciences, healthcare stocks to buyGilead Sciences, Inc. (GILD) got crushed on Monday in the wake of news that AbbVie Inc. (ABBV) and benefits manager Express Scripts has struck an exclusivity deal that ultimately meant Gilead wouldn’t be able to sell one of its hepatitis drugs at Express Scripts’ network pharmacies.

All told, GILD stock fell more than 11% following the stifling announcement.

The market may have overreacted though, sending GILD stock lower than it deserved to be. While hepatitis drugs make up a big piece of the Gilead Sciences portfolio, it’s not the only thing Gilead has working for it, and Express Scripts isn’t the only place GILD can sell its products.

With a forward-looking P/E of 9.2 and now a motivation to start making such alliances of its own, Gilead Sciences becomes a growth and a value play, not to mention one of the most attractive healthcare stocks to buy for 2015.

Healthcare Stocks to Buy — HCA Holdings (HCA)

HCA185While health insurers have gotten pickier and stingier after the introduction of Obamacare, to well-run hospitals, the upside of more insured patients has more than proven worth the added hassle.

HCA Holdings Inc. (HCA) is one of those better-managed hospital groups. Its operating margin rate of 14.9% is second-to-none among the major hospital chains, and its net margins of 4.9% are consistently among the best within the hospital sliver of the market’s healthcare stocks.

And yes, sales and profits are poised to keep growing, judging from Q3’s numbers posted in October. HCA Holdings posted a 46% improvement in per-share profits for HCA stock, and a 9% increase in revenue. The bulk of the increases were attributed to considerably stronger patient enrollments.  The launch of a recently-announced $1 billion HCA stock buyback plan only adds to the upside HCA Holdings offers investors in 2015.

Healthcare Stocks to Buy — Cerner Corporation (CERN)

cerner, heathcare stocks to buyLast but not least, while healthcare record-keeping was already a complicated matter, the introduction of Obamacare in addition to broadly-rising healthcare costs only made it messier and more complicated.

Enter Cerner Corporation (CERN), which restores some sanity into the now-largely-digital paperwork aspect of the healthcare-delivery business.

In simplest terms, Cerner facilitates back-end systems that allow hospitals, nurses, devices, doctors, pharmacies, patients and even drug researchers to all work together as effectively as possible. The end result of delivering such a service is revenue growth in nine of the past 10 years, earnings growth in all 10 of those years, and wider margins in the majority of the past 10 years.

The pros say things are only set to continue improving for Cerner Corporation, too, largely fueled by a swath of newly-insured individuals. Analysts expect 2015’s top line to reach $3.82 billion, up 13.1% from 2014’s most likely revenue total. Earnings are projected to grow 18.8% next year, from this year’s predicted profit of $1.65 per share of CERN stock to $1.96 in 2015.

Granted, CERN isn’t cheap compared to other healthcare stocks of its ilk, with a forward-looking P/E of 33.1. However, frothy valuation hasn’t been a problem for Cerner shares yet, and investors are likely to continue focusing on its strong growth opportunity.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2014/12/healthcare-stocks-to-buy-celg/.

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