Turn on business news and you’re likely to get discouraged very quickly. While I don’t want to continue focusing on the negativity, I’m also very practical. Merely ignoring the pain doesn’t make it go away. However, one bright spot in this novel coronavirus pandemic is healthcare stocks. Moreover, this sector may have a longer upside pathway than you might think.
As Eli Dourado, senior research fellow at The Center for Growth and Opportunity at Utah State University explains, an economic recovery will likely involve bolstering healthcare stocks. That’s because the virus must be defeated to prevent a recurrence of societal disruption. Dourado writes:
“At this point, the performance of the economy depends most on containing the virus and developing a workable plan to test and trace after the lockdowns end so that they won’t have to be reinstituted. Until we develop a vaccine, there will always be a risk of a new outbreak that requires draconian measures to contain.”
Another tailwind for healthcare stocks is the jump in attention (read funding) for scientific and pharmaceutical projects. For the first time in a long time, we Americans received a harsh lesson that our enemies aren’t always human. Dourado points out:
“One can hope that, given recent events, we will invest more resources with more urgency in biotech to be able to better respond to future biological crises. This could lead to a boom in new biological understanding and ultimately in new cures in the next decade.”
Of course, every sector will have winners and losers. Below are my ideas for healthcare stocks to buy:
- Teladoc Health (NYSE:TDOC)
- Johnson & Johnson (NYSE:JNJ)
- 3M (NYSE:MMM)
- Alpha Pro Tech (NYSEMKT:APT)
- Rite Aid (NYSE:RAD)
- Teva Pharmaceutical (NYSE:TEVA)
- Gilead Sciences (NASDAQ:GILD)
- Moderna (NASDAQ:MRNA)
- Inovio Pharmaceuticals (NASDAQ:INO)
As with any investment during this unprecedented time, please exercise caution. But given their fundamentals, these healthcare stocks provide reasonable viability for continued gains.
Healthcare Stocks: Teladoc Health (TDOC)
One of the best-performing healthcare stocks during this pandemic, Teladoc Health has obvious appeal. As an app-based service that connects patients with medical professionals, this mechanism is about as contactless as you can get. Naturally, with governments enforcing shelter-in-place orders along with social distancing guidelines, TDOC stock has absolutely skyrocketed.
What’s particularly appealing for Teladoc investors is that contactless service doesn’t just benefit patients. Rather, doctors and nurses have borne the brunt of the coronavirus pandemic. According to Newsweek, more than 200 doctors and nurses have died combating Covid-19 worldwide. They are the best of humanity and they deserve as much protection as possible; hence, TDOC stock has a “feel-good” element to it as well.
Moving forward, Teladoc provides an easier avenue for patients suffering from iatrophobia, or the fear of doctors. Additionally, the company is a great way to save costs, since you don’t have to sit through traffic or wait alongside other patients to receive a medical consultation. For these reasons, I expect TDOC to remain one of the outstanding names among healthcare stocks.
Johnson & Johnson (JNJ)
Although its shares are currently up for the year, Johnson & Johnson hasn’t made it easy for long-term stakeholders. From early February through most of March, JNJ stock plummeted, making it a rather curious sight among relevant healthcare stocks. But from there, Johnson & Johnson has picked up substantial positive momentum. In my opinion, we can reasonably expect continued upside.
First, I dare say that the controversies that have plagued the company are in the rear-view mirror. That’s not to say that we should excuse corporations for causing harm to society. But issues such as the opioid crisis or asbestos in baby powder are not at all front-page news. Instead, everyone is worried about staying safe, which benefits JNJ stock via its underlying over-the-counter medication business.
Second, we should expect Covid-19 to be a wake-up call for all Americans. No one wants to be left out in the cold during an emergency. Therefore, even after this pandemic fades, it wouldn’t be surprising for JNJ to experience a “stock up” catalyst. So, keep shares on your list of healthcare stocks to buy.
Though not technically considered a healthcare stock, industrial giant 3M has been making headlines this year. Admittedly, not all of the news is good. Accusations have run rampant about the company selling N95 face masks to the highest bidder. I’m not sure how much of that impacted MMM stock. Suffice to say, though, those headlines didn’t do it any favors.
However, one important point to remember is that 3M is one of the few manufacturers making N95 masks at such large scale, along with other personal protective equipment (PPE). And I don’t regard MMM stock as just a coronavirus play.
During the time when healthcare workers were desperately struggling to acquire N95 face masks, various industries that had stockpiles donated their supplies. Obviously, this is a beautiful example of cooperation. At the same time, those industries are now short.
Factor in demand from other countries who are on a delayed infection curve relative to the United States, and you have a longer pathway for “bonus” revenues.
Alpha Pro Tech (APT)
Before I get into my discussion for Alpha Pro Tech, you should realize that this is probably the riskiest name among the healthcare stocks on this list. So, why bother mentioning it? For starters, APT stock has witnessed explosive growth, putting almost every other investment in its shadows. But more importantly, its core business of providing PPE has enjoyed a free marketing bump.
Admittedly, this doesn’t guarantee continued profitability for APT stock. Again, I must emphasize that this is a speculative opportunity. Further, you may want to wait for the days when shares incur a negative session.
That aside, I can’t help but notice that PPE may stay with us as a viable concept for years. Even China, which appeared to have defeated Covid-19, is experiencing concerns about a recurrence. This anxiety has been enough for gyms to shut down in Beijing. Therefore, this ride may not be over yet.
Rite Aid (RAD)
You’d think that among healthcare stocks to buy levered to the pharmacy business, names like CVS Health (NYSE:CVS) and Walgreens Boots Alliance (NASDAQ:WBA) would shine the brightest. However, these two have been consistently negative. That’s not to say that Rite Aid has been a sterling example of stability, because it’s not. However, RAD stock has shown promise as a turnaround play.
As with Alpha Pro Tech, Rite Aid is a speculative investment. Once the coronavirus fades, the biggest concern is that Wall Street will again focus on the company’s vulnerable financial picture. Further, this is a tough sub-segment relative to other healthcare stocks.
But if you’re willing to set that aside, the customer demographics that drive RAD stock have been unusually favorable. For instance, Rite Aid’s prime customers are those ages 55 and older — which are prime targets of the coronavirus. Moreover, Rite Aid’s customers are mostly male; again, this is another risk factor.
Put another way, Rite Aid serves those that need its business the most. And if we do have a second wave of Covid-19, expect RAD stock to move higher.
Teva Pharmaceutical (TEVA)
No company would ever wish for a pandemic. But if any organization hoped for a worldwide event that would take the heat away, it would probably be Teva Pharmaceutical.
As the prime name in generic drugs, TEVA stock has appeal in any market. But as InvestorPlace’s Dana Blankenhorn described, the pharmaceutical firm’s myriad scandals have left its shares fishing for a bottom.
But as with Johnson & Johnson, very few people are thinking about those controversies, as terrible as they are. Instead, it’s all about basic survival, including food, water and mountains of toilet paper. Furthermore, the disrupted healthcare network has made reliable and reasonable access to prescription medicine a serious issue.
Naturally, this is a topic that will stay with us for decades after this crisis fades. Therefore, TEVA stock may have gotten a pass. Let’s just hope management uses this reprieve wisely.
Gilead Sciences (GILD)
Since the middle of 2017, Gilead Sciences has failed to spark sustained investor interest. But this year, Covid-19 changed everything. When it became apparent that the coronavirus would not be contained within China’s borders, GILD stock shot up. However, it hasn’t been an easy ride because that’s not how healthcare stocks work.
Nevertheless, Gilead Sciences’ troubles and PR gaffes can’t take away from the fact that so far, the pandemic has been a net positive for GILD stock. Specifically, laboratory tests indicated that Gilead’s drug remdesivir was a viable candidate to treat Covid-19. Because of this, the company has an early lead against the competition for extended clinical trials. Better yet, the data is moving favorably.
If you’re looking to profit from the coronavirus, I believe GILD stock gives you the most stable opportunity. As a well-known entity, it’s not going to make you rich. However, if for whatever reason things go awry, it will likely not bleed out your portfolio.
Healthcare stocks that are levered to the coronavirus are not everyone’s cup of tea. However, if you can stomach some risk, Moderna may be right for you. In my opinion, the company offers one of the most interesting concepts. As I discussed not too long ago, Moderna hijacks a virus’ messenger RNA to acquire a copy of its genetic sequence. From there, scientists can produce antibodies to that virus.
Not surprisingly, MRNA stock lifted off in late February. Even at the end of April, shares are carrying substantial momentum. I don’t expect that to wane considering that Covid-19 has become a devastating disease worldwide. And as I mentioned earlier, the threat of recurrence gives these healthcare stocks an extended pathway.
Beyond this crisis, Moderna’s technology offers exciting solutions for future outbreaks. And believe me: The world is paying attention because we can’t afford another economic shutdown.
Inovio Pharmaceuticals (INO)
Utilizing its proprietary technology, Inovio Pharmaceuticals was one of the first biotechnology firms to offer a potential vaccine for the coronavirus. What was more remarkable was that the company didn’t require a sample of the virus, but rather its genetic profile. While INO stock was a risky endeavor, I ultimately came to the conclusion in early February that it was a compelling buy.
Fast forward into the back half of April and the basic narrative hasn’t changed much. Yes, INO stock is still risky, but it has more than proven its worth with investors. Because there’s still much we don’t know about the coronavirus, Inovio still offers relevance in this regard.
More importantly, INO stock is much more than just a coronavirus play, As Utah State University’s Eli Dourado emphasizes, we can’t let future infectious diseases derail the global economy. One pandemic is already enough, and it could send us into a prolonged recession — or worse. I shudder to think what two shutdowns would mean for us.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.