Buckle Up! 3 Healthcare Stocks Set to Soar to New Heights


  • Individual healthcare stocks have been trading really well, even as the Health Care Select Sector SPDR Fund (XLV) is treading water.
  • Cardinal Health (CAH): The healthcare services group sports double-digit earnings growth, has a reasonable valuation and a strong chart.
  • Johnson & Johnson (JNJ): Johnson & Johnson stock is giving investors a pullback opportunity after a big post-earnings rally.
  • UnitedHealth Group (UNH): UnitedHealth Group reports earnings have exceeded expectations, after enduring a dreadful decline as shares fell in multiple trading sessions.
Healthcare Stocks - Buckle Up! 3 Healthcare Stocks Set to Soar to New Heights

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Everyone seems to be focused on the Nasdaq, as tech stocks lead the way higher. While that may be the case, we’ve seen soaring healthcare stocks too. The observations here are very stock specific though.

When we look at the technology sector, that’s where the action seems to be.

Mega-cap tech has been driving the Nasdaq higher, as the index is up about 36.5% so far in 2023. When it comes to FAANG, the worst performer of the group — Netflix (NASDAQ:NFLX) — is still up almost 50% year to date. The ARK Innovation ETF (NYSEARCA:ARKK) is up almost 60% this year, showing the recent strength in growth stocks too.

Yet, when we look at the Health Care Select Sector SPDR Fund (NYSEARCA:XLV), it’s actually down about 2% so far this year. Over the last 12 months, shares are only flat. Despite that though, many individual healthcare stocks are hitting new highs. These stocks continue to quietly churn out steady gains and fly under the radar. Let’s look at a few now.

Healthcare Stocks to Buy Now: Cardinal Health (CAH)

Daily chart of CAH stock
Click to Enlarge
Source: Chart courtesy of TrendSpider

Cardinal Health (NYSE:CAH) has been trading incredibly well so far this year. While the XLV ETF is still down a bit this year, Cardinal Health is up an impressive 20%. From the February low, shares are up more than 33%.

Despite the lofty run, shares still pay out a 2.2% dividend yield. Even better, analysts are calling for about 12.5% revenue growth this year and 9% growth next year. On the earnings front, estimates are even better. Consensus expectations call for 13.5% growth in 2023 and an acceleration to 15% growth in 2024.

Even though the stock has had a nice run, shares still trade at less than 16 times earnings. Now working on its fourth weekly decline in the last five weeks and CAH stock is pulling back.

If it can hold the $90 level — and thus the 10-week moving average and recent support, it could charge back up to the $95 level. Above $95 and investors will turn their attention to $100.

A Dividend Stalwart Has New Life: Johnson & Johnson (JNJ)

JNJ is a leading healthcare stock
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Source: Chart courtesy of TrendSpider

I have been wondering when Johnson & Johnson (NYSE:JNJ) would get the attention it deserved. The company and the stock have a lot going for it, but investors have not been willing to pay up for this name. Until now.

On July 20, the company delivered a top- and bottom-line earnings beat, growing sales by 6.4% year over year and beating revenue estimates by $860 million. Management also gave a boost to its full-year revenue and earnings outlook.

At first, the stock was little moved, opening higher by just 2% — after a three-day skid and a stretch where the stock declined in nine out of 12 sessions — but then bulls got on board. Shares rallied 6% the day it reported earnings, then rallied for six straight days. In all, the stock rallied over 10% on its earnings results.

Despite falling after its talc-related lawsuit bankruptcy plan was rejected a second time, shares held right where they needed to. That’s as the $165 to $166 area held as support. If the stock can fully rebound, $175 is in play, then the $180s. However, a break of $165 may set up a test of uptrend support.

It’s also worth mentioning J&J’s dividend status. In April, the company delivered a 5.3% dividend increase, the 61st consecutive year of dividend increases for Johnson & Johnson.

A Brewing Breakout: UnitedHealth Group (UNH)

Daily chart of UNH stock
Click to Enlarge
Source: Chart courtesy of TrendSpider

UnitedHealth Group (NYSE:UNH) suffered a nasty fall going into earnings, declining almost 7% as shares fell in seven out of eight trading sessions.

Then the firm reported earnings — a top- and bottom-line beat where sales of $92.9 billion beat expectations by almost $2 billion — and the stock responded instantly. Shares climbed about 15% amid a four-day rally, which was part of an eight-day post-earnings win streak.

Shares are ramming right into a key downtrend level now, but are also holding above an important area as well. That’s as the stock is above all of its daily moving averages, while holding support around the $500 area, 200-day moving average and the second-quarter high.

If UNH stock can hold this zone and clear the $515 level, it opens the door to the 2023 high up near $530, then potentially puts the $550s in play.

On the date of publication, Bret Kenwell held a long position in JNJ and UNH. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Article printed from InvestorPlace Media, https://investorplace.com/2023/08/buckle-up-3-healthcare-stocks-set-to-soar-to-new-heights/.

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