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Best Healthcare Stocks to Buy in 2021

Author: Jim Mwangi

The healthcare industry is large and diverse enough for almost any investor to build a decent portfolio of the best healthcare stocks. 

While 2020 was dominated by the COVID-19 pandemic several healthcare stocks posted robust earnings and decent share price growth. The sector undoubtedly put up a good fight last year and it is expected to perform better in coming years. Therefore, stock traders putting together a successful, diversified portfolio could consider including some healthcare stocks. This guide lists our top ten healthcare stocks. 

Where Can I Trade Healthcare Stocks?

Trading healthcare stocks with the right broker will open up your investment opportunities significantly. Conversely, the wrong broker will limit your options and markedly push up the costs of trading.

With all the information out there about different brokerage companies, picking the best broker can be an uphill task. We’ve shortlisted some of the best brokers based on their fees, features, and regulatory status.

1
Biogen (BIIB)
Our score
10
The US-Based biopharmaceutical is one of the pioneers in neuroscience and therapies for other disorders
Researchers at Biogen might be close to a breakthrough on diseases like Alzheimer and set to get approval from the FDA
Votatile stock but some experts consider it as a good long-term opportunity
Description:
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2
Bio-Rad Laboratories (BIO)
Our score
9.3
Founded in 1952
$2.55B revenue in 2020
P/E ratio of 4.7
Description:
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3
Teladoc Health (TDOC)
Our score
8.7
Heavyweight in the digital health sector
Steady growth of revenue over the last 5 years
Acquired Livongo in a $18.5B merger in 2020
Description:
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4
Intuitive Surgical (ISRG)
Our score
8.5
Founded in 1995
Strong returns over the last 5 years
Heavyweight in the healthcare equipment sector
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5
Vertex Pharmaceuticals (VRTX)
Our score
7.9
Pharmaceuticals company focused on medical research for serious and genetic diseases
The company went public on Nasdaq in 1991
Over the last decade, VRTX stocks have outshined other companies in the biotech sector
Description:
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What Are Healthcare Stocks?

The healthcare sector is highly diversified, and such stocks fall into six broad categories: 

  • Biotechnology: companies focused on researching and developing new treatments and devices
  • Insurance: firms that provide medical insurance cover and other healthcare plans
  • Pharmaceuticals: manufacturers of branded and generic drugs
  • Medical equipment: manufacturers of equipment used in healthcare settings
  • Facilities: healthcare providers such as hospitals, clinical labs, rehab settings, nursing homes, etc
  • Sales & distribution: wholesalers, distributors, and retailers of healthcare products

Healthcare is an important sector to invest in because:

  • Healthcare is the second-largest industry group in the S&P 500
  • Over 10% of the Nasdaq Composite Index comprises health care stocks
  • Five out of the 30 Dow Jones Industrial Average index companies are healthcare-related

How to Trade and Invest in Healthcare Stocks?

1

Open a Trading Account

Open an account with a broker that has reasonable brokerage fees, an excellent trading platform, and access to the markets you want to trade. Provide your name, address and email to open an account, and note that reputable platforms will want to see proof of your identity.

2

Choose Market

You will be required to deposit some money into the account before you begin trading. Then you can then pick the stocks to buy or sell based on fundamental research or technical analysis.

3

Place Your Trade

Finally, press the “buy” button for the stock you wish to trade. Remember to set up stop-loss or take-profit orders to manage your risk, and monitor your stock’s progress periodically until it’s time to sell.

Top 10 Health Shares to Trade

The COVID-19 pandemic benefited many healthcare stocks, driving share growth and increasing their value into 2021.

We have found ten of the best health stocks to trade on the stock market today: 

  1. Medtronic
  2. CVS Health 
  3. Zoetis
  4. Teladoc Health
  5. Humana 
  6. Vertex Pharmaceuticals
  7. Intuitive Surgical
  8. Biogen 
  9. Bristol-Myers Squibb 
  10. Pfizer

1. Medtronic (NYSE: MDT)

Medtronic is a renowned manufacturer and distributor of therapeutic medical devices primarily for managing chronic illnesses. 

With a market cap of $149,651m at the time of writing and with the worrisome issues brought about by coronavirus receding, Medtronic is projected to experience sizeable post-pandemic growth. The company has also posted better than predicted earnings per share and revenues in its most recent quarters, making it a stock worth considering at the moment.

2. CVS Health (NYSE: CVS)

Since 2015, CVS Health has been on a painful journey from a high-flying growth stock to its current status as a value stock. However, in the present world of low prospective returns and high equity multiples, investors may get a more favourable risk/reward from value stocks like CVS.

Cash flow is still quite strong at over $100billion annually, which has allowed the company to pare down its debts. COVID-19 vaccinations distribution and an optimised debt level provide plenty of room for buybacks and dividend increases.

3. Zoetis (NYSE: ZTS)

Zoetis has been relatively resilient during the COVID-19 induced crisis. Movement restrictions and the resultant reliance on companion animals may have been tailwinds for this US-based manufacture of animal medicine and diagnostic products.

Zoetis has close to $80 billion in market capitalisation at the time of writing. Its revenue growth, operating income, and margin are favourable for better growth in the FY2021 making Zoetis a favourable stock to trade this year. 

4. Teladoc Health (NYSE: TDOC)

The adoption of virtual healthcare services provision increased considerably with the onset of the pandemic. Consequently, companies like Teladoc Health (which is one of the longest-serving virtual health firms) are now on a path of significant growth with no signs of stopping anytime soon.

Teladoc is a leader in the rapidly expanding field of telehealth. Its shares went up remarkably in the last year, and growth for the company has been both organic and through acquisitions. Telehealth is thus not only a potential growth story beyond the coronavirus pandemic but also a worthy stock to trade.

5. Humana (NYSE: HUM)

Humana may have reported some losses per share in its recent quarterly report, but the stock is still one to put on your trading watchlist. Some possible tailwinds for this Louisville-based health insurer include membership growth, Joe Biden’s presidential victory, and a proposed lowering of the minimum age at which one is eligible to buy into Medicare.

Expert Tip on Investing in Healthcare Shares

A well-balanced, high-quality portfolio that will bring good returns and consistently beat the market ought to include low-risk stocks from companies with healthy profits, strong revenue growth, and lots of cash. Also, go for companies that have consistently outperformed the broader financial market year after year.
- Jim Mwangi

Why Invest in Healthcare Shares?

While healthcare may not dominate the stock market like big tech does, buying shares in this sector offers real opportunities for long-term value and returns. 

Healthcare costs have outpaced global inflation rates, and national health spending is projected to continue rising in the coming years. There are also a few trends that favour growth, including advances in technology and medicine, an ageing population, and a ballooning burden of chronic illnesses. All these factors point towards growth and potential generous returns for those who invest in healthcare stocks in the coming years.

Nevertheless, financial trading has some level of risk attached to it. An investor must take active risk management measures for every position they open.

Frequently Asked Questions

  1. Yes. Most reputed brokers will insist on “know your customer” (KYC) procedures as it helps to provide a safe and secure environment for their users. Identity verification helps to keep the bad actors out.

  2. A lot of news is available on social media. Many expert traders offer advice on such media outlets. You can also add the share to a portfolio and news tracking app that provides updates related to the share.

  3. You should always select a regulated platform for trading, and make use of additional security measures such as two-factor authentication (2FA) to secure the trading account.

  4. Yes. Most countries consider profits from investing and trading as subject to capital gains tax or income tax, but some countries allow tax-efficient accounts such as a Stocks & Shares ISA or Self-Invested Personal Pension in the UK.

  5. Yes. Some brokers may provide additional services such as bot trading. You can also use stop orders and limit orders that will automatically buy or sell a stock when the price reaches a particular level.

  6. Most brokers provided extended trading hours on their platforms, which allow investors to trade for 24 hours, Monday to Friday, on popular stock exchanges around the globe.

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