For long-term investors, the recent market hiccups and volatility has opened up some pretty big bargains. And some of the biggest can be found in the among the various healthcare stocks. From medical device firms to small biotech stocks, the healthcare sector has been hit hard over the last few weeks.
The sector proxy the Health Care Select Sector SPDR (NYSEARCA:XLV) dropping by nearly 13% since hitting a peak during January.
But healthcare stocks represent one of the best long-term sectors around. Rising longevity and growing populations — as well as better therapies — have only increased demand. That should hold steady over the next few decades.
With that, the recent patch of lower returns could be seen as huge buying opportunity for healthcare stocks for patient investors. But which ones to buy? The following five could some of the best around.
Healthcare Stocks To Buy #1: Boston Scientific (BSX)
There are all sorts of healthcare stocks that dabble in the medical devices sector, but none can compete with Boston Scientific Corporation (NYSE:BSX) in the heart disease sector.
BSX has quickly become the go-to firm for a variety of coronary-related treatments. This includes implanted defibrillators, diagnostic tools, and its famous drug-coated stents. All in all, BSX managed to report roughly $4.5 billion in heart product sales last year. With more Baby Boomers undergoing heart-related surgeries and procedures, the higher revenue trend for BSX and its robust coronary business is almost assured.
But what is really great is that Boston Scientific has expanded in recent years into other lucrative areas.
Today, BSX pulls in another $4 billion or so worth of sales from a diverse range of devices — including everything from spinal cord stimulators to erectile dysfunction implants. And Boston Scientific has been expanding its other offerings in a big way. So far this year, it’s purchased privately held Securus Medical, NxThera, and EMcision, in order to boost its electrophysiology, urology and endoscopy businesses. These bolt-on buys should help drive innovation and cash flows for BSX over the long haul.
With a forward P/E of 18, BSX is priced right for future growth and could one of the best healthcare stocks to own over the long haul.
Healthcare Stocks To Buy #2: Pfizer (PFE)
When most people think of healthcare stocks, the major pharmaceuticals are the first thing that pop into their mind. The second is their patent cliffs and loss of big time revenues from blockbuster drugs. But pharma Pfizer Inc. (NYSE:PFE) is growing just like its former glory days and looks like it might have cushioned the fall from its upcoming cliff — just as it survived previous ones.
PFE has had 22 major FDA approvals since 2011. Those approvals have allowed it to fill its pipeline and get over its loss of Lipitor to generic competition. Moreover, the pharma has 96 drugs and therapies currently in various stages of clinical trials — that includes 32 in phase 3 trails. All in all, Pfizer expects 15 of these drugs to be considered blockbusters within 5 years. That will more than make up for revenues lost and provide plenty of cash flow growth.
Not that PFE needs help on that front.
Pfizer has a staggering amount of cash on its balance sheet and thanks to the new tax plan, it has the ability to move that $160 billion back home. That buys a lot of future pipeline growth as well as pads the firm’s already healthy dividend.
For investors looking for a safer healthcare stock that still has a lot of growth to offer, PFE could be it.
Healthcare Stocks To Buy #3: Alkermes Plc (ALKS)
When it comes to the biotech sector, you live and die by the FDA and its approval process. And that’s just what happened to Alkermes Plc (NASDAQ:ALKS).
The drug maker and its investors were expecting a big-time approval from the FDA for its antidepressant therapy. Then the FDA sent Alkermes a “Refusal to File” letter. That sent the stock crashinf 20% in one day. However, that drop may be what patient investors need to snag up shares of ALKS.
A “Refusal to File” letter doesn’t mean that drug is dead, it’s just the regulator wants a few more tests/trails before it can approve it. Alkermes has appealed the letter, but worst comes to worse, it can go back and give the FDA what it wants.
Secondly, ALKS isn’t a one-trick pony biotech stock. In fact, it already has two approved and revenue generating drugs. This includes VIVITROL — which is designed to prevent opioid addiction and is given to patients on high doses of the painkillers. Last quarter, sales of the drug jumped 22%. On top of this, ALKS continues to reap decent revenues from its formulation business. Here, Alkermes helps other firms in terms of drug delivery to already-approved drugs more effective. Add in ALKS rich pipeline and you have a real recipe for success.
And now investors can snag-up that success for a 20% discount.
Healthcare Stocks To Buy #4: Ventas, Inc. (VTR)
It stands to reason that if healthcare demand is rising, it’ll take more hospitals to facilitate that care. Some of the best opportunities among healthcare stocks are those firms that own the real estate related to hospitals, doctor’s offices, senior living facilities and healthcare properties. Ventas, Inc.(NYSE:VTR) is one of the elder statesmen of the so-called healthcare real estate investment trusts (REITs).
VTR owns a wide swath of 1,200 diverse healthcare-related properties. This focus on owning and not running hospitals, senior centers and science labs has helped VTR’s return a staggering 24% average annual return since its IPO roughly 2 decades ago.
But here’s the best part, Ventas has been hit with a double whammy. General market malaise and the initial REIT reaction to raising rates has pushed down shares in a big way. That’s pushed up its yield to a big 6.3%.
For investors looking for some big-time income from healthcare stocks, VTR has to be on your list.
Healthcare Stocks To Buy #5: Laboratory Corporation of America (LH)
We’ve all been there. Your doctor orders some blood work and you have to visit a specialized center to have that test completed. There’s a good chance that you had that test done at a Laboratory Corporation of America Holdings (NYSE:LH) center.
LH is one of the largest owners of these centers in the country and it makes a pretty penny — about $10 billion in revenues last year — by doing routine blood work and other diagnostics for doctors and hospitals. Doctors and health management organizations love it because it’s cheaper to have Lab Corp run these sorts of tests than do it themselves.
But LH’s future is providing more specialized — read: higher margined — tests for rare diseases, cancer and other conditions. Lower PCR and genetic testing costs have allowed Lab Corp to quickly expand in these areas — making the concept of personalized medicine a reality. That makes the future very rosy for LH despite recent issues with lower Medicare reimbursement.
With a P/E of 22, LH isn’t too expenses given its growth rates and potential in genetic testing. That makes it a great healthcare stock to own.
Disclosure: Aaron Levitt is long BSX.