Investors always hope to buy low and sell high. In order to do so, it’s necessary to identify stocks that are undervalued. The healthcare sector, like all other sectors, is rife with opportunities and offers lots of value. While the undervalued pricing is important, it’s also important to note that healthcare stocks to buy offer relative safety. The sector tends to perform well in all markets: Whether the market is up or down, people need healthcare. As a result, the shares of firms engaged in the business tend to operate with relative steadiness. So, if you can find inexpensive healthcare stocks to buy, the results are often profitable investments. Here are a few to consider.
Healthcare Stocks to Buy: Pfizer (PFE)
Pfizer (NYSE:PFE) is one of the most undervalued healthcare stocks to buy at the moment. The narrative for bullish sentiment is very straightforward: Pfizer is undergoing a Covid-19 hangover and the markets have discounted it as a result. The company’s revenues spiked as a result of its success in developing a commercially viable vaccine. However, those revenues have fallen off as the pandemic ended.
I like to refer to the arc of Pfizer’s revenues when discussing the current opportunity. Pfizer reported roughly $40 billion in sales in each of the three years between 2018-2020. That doubled in 2021 and reached $100 billion by 2022 on vaccine commercialization. The company should reach $65 billion in sales this year with plans to launch nearly 20 products in the next year and a half. Buy it and receive a dividend yielding 4.5% for your patience in Pfizer’s developmental prowess.
Zymeworks (ZYME)
Zymeworks (NASDAQ:ZYME) focuses on difficult-to-treat cancers and other diseases. The company is on the cusp of commercializing its lead candidate drug Zanidatamab. In addition, the company has an impressive roster of partners that includes some of the most well-known names in the pharmaceutical industry. Further, ZYME stock trades at $7 and has the potential to double.
Zanidatamab is an antibody targeting the HER2 receptor and is being studied for its use in treating HER2-specific cancers. The drug is currently in multiple pivotal clinical trials meaning it’s potentially very close to US FDA marketing approval. That pipeline can be found here. Based on its most recent 10-Q the company should have no problem continuing to approach commercialization for several years.
Healthcare Stocks to Buy: UnitedHealth Group (UNH)
UnitedHealth Group (NYSE:UNH) is one of the top healthcare stocks to buy. So, just how much is it undervalued? The easiest way to answer that question is to look at its current price and compare it to where Wall Street believes UNH shares are headed. Fortunately, priced at $503 now and valued at $573 there’s roughly a 14% return expected at the moment.
That doesn’t include UnitedHealth Group’s dividend which adds an additional 1.5%. UNH shares have done incredibly well over the past decade returning 23% on an annual basis during that period. The company is growing rapidly despite its size. Revenues crossed the annual $300 billion threshold in 2022 and might exceed $400 billion in 2024.
It’s the kind of opportunity that doesn’t require a ton of thought. UnitedHealth Group is almost certain to grow your money in a short period of time and is likely to continue growing it thereafter.
Viking Therapeutics (VKTX)
Investing in Viking Therapeutics (NASDAQ:VKTX) stock requires one to get behind a relatively simple thesis. The recent decline in its share price was based on a knee-jerk reaction that is illogical at its root.
That knee-jerk reaction followed data related to Eli Lilly’s (NYSE:LLY) weight loss drug, Retatrutide. The drug is proving effective with weight loss and is seeing unmatched efficacy so far. However, that’s not what’s important in relation to Viking Therapeutics, which hopes to commercialize a drug that reduces fat in the liver caused by non-alcoholic steatohepatitis (NASH). Retatrutide is also proving efficacious in reducing liver fat. That news caused VKTX and other NASH stocks to drop precipitously.
However, Retatrutude is only in phase 2 clinical trials. It may never reach commercialization. And even if it does, there’s no way to know if it will be approved for NASH or how far down that path Eli Lilly might go. That idea is likely why Viking Therapeutics is showing signs of rebounding of late. It still has a great chance of success and the market’s overreaction is your opportunity.
Healthcare Stocks to Buy: Intuitive Surgical (ISRG)
Many readers will remember how negatively the pandemic affected Intuitive Surgical’s (NASDAQ:ISRG) stock. Patients were afraid of hospitals and thus avoided elective surgeries that used the firm’s Da Vinci robots. You might be surprised to learn that the company continues to deal with that same issue. Procedure volumes have been negatively affected in parts of Asia where Covid hospitalizations remain elevated.
That said, Intuitive Surgical continues to rebound. Global Da Vinci procedures increased by 22% in the second quarter. The company increased its base installations of Da Vinci systems by 13% to 8,402 in total.
Revenues are up, net income is rising, and there’s plenty of upside in ISRG stock that remains for investors who pull the trigger right now. The firm has no debt at all and is financially sound overall. Its products have very strong margins meaning investors can logically expect roughly 25% of its sales to end up as net income. And it’s growing rapidly as the pandemic wanes globally.
Zimmer Biomet Holdings (ZBH)
Zimmer Biomet Holdings (NYSE:ZBH) sells orthopedic reconstructive products. Those who have had a knee, hip, shoulder, or foot/ankle surgery very well may have contributed to the stock’s performance.
Like Intuitive Surgical, Zimmer Biomet is bouncing back nicely as the pandemic subsides globally. Sales increased by 7.4% during the first half of the year with higher growth and volumes in the domestic market. The international market is still marred by the same issues that affect Intuitive Surgical. Anyway, investors should be very interested in how rapidly the firm’s net income has rebounded. The firm reported $167 million in earnings during the first half of 2022. That figure increased to $442 million this year.
The company’s strategy is straightforward: It establishes relationships with orthopedic surgeons as a vendor and high switching costs tend to keep the relationship strong. It develops and introduces new products into those channels and thus the firm grows.
LivaNova (LIVN)
LivaNova (NASDAQ:LIVN) sells oxygenators, heart-lung machines, and transfusion systems among other devices.
It’s also growing quickly and recently saw its revenues increase by 15.6% to $293.9 million. The company expects to grow by as much as 10% this year and there’s roughly 20% upside baked into target prices at the moment. Despite the positive outlook and expectation of growth for investors, LivaNova does have some current issues. For one, expense increases outstripped profit growth during the period. The result was that income fell precipitously for the firm.
The company is now under the direction of an interim CEO so it’s clear that there are some issues to sort out. That said, the company has a decent amount of analyst coverage and the consensus is that shares will grow. The company has operated for 5 decades so it’s inevitable that it has faced adversity before.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
