Best Healthcare Stocks to Invest in 2024

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Healthcare stocks can provide more stability than most sectors because healthcare demand is rising fast, thanks to our aging population.

The healthcare sector is up 4.7% since the start of the year, outpacing the S&P 500, which is up 3.84% in 2024. On Feb. 13, the worst day in the markets so far this year, with the S&P 500 dropping by more than 68 points, the healthcare sector only fell 1.3%, outperforming all other sectors. Healthcare costs are expected to go up globally and that benefits all healthcare stocks. 

According to the WTW Global Medical Trends Survey, the medical cost trend, the rate at which the cost of healthcare services is increasing over time, rose to a record of 10.7% in 2023 from 7.4% in 2022. The insurer-reported cost trend for 2024 shows another average increase of 9.9% in 2024.

In this guide, we take a look at the best healthcare stocks to invest in at the moment. See 10 of the best stocks in the sector below based on their potential for earnings growth and share price gains: 

Best Healthcare Stocks to Invest in 2024

  1. UnitedHealthGroup: The largest U.S. healthcare insurer is also a primary care company, pharmacy benefits manager and specialty pharmacy company, with a total return of about 745% in the past decade.
  2. Intuitive Surgical: The medical device maker has an early mover edge in robotic surgery and is best known for its da Vinci robotic surgical system and a platform for minimally invasive lung surgery.
  3. Eli Lilly: The pharmaceutical company’s shares are soaring due to the success of diabetes/weight loss drug tirzepatide, known as Mounjaro to treat diabetes and Zepbound to treat obesity. 
  4. Steris: The large-cap Dublin-based company specializes in products to provide a sterile environment in healthcare settings and saw double-digit revenue and EPS gains in the third quarter.
  5. Merck: The drugmaker has been active in acquisitions and has a cancer therapy, Keytruda, which was the top-selling drug in the world in 2023. Its high valuation shows its popularity with investors.
  6. Vertex Pharmaceuticals: It dominates the cystic fibrosis treatment market and has a big potential approval ahead for a non-opioid painkiller and a recently approved gene-editing blood disorder therapy.
  7. AbbVie: The pharmaceutical giant is already showing it has therapies capable of replacing the declining sales for its blockbuster Humira, thanks to increased sales of immunology drugs Skyrizi and Rinvoq.
  8. Bruker Corporation: The mid-cap life science tools company saw double-digit revenue growth in all four of its groups in 2023. 
  9. GSK: The pharma giant is seeing a lot of excitement about the potential for multiple myeloma treatment Blenrep, shingles vaccine Shingrix, and its RSV vaccine.
  10. West Pharmaceutical Services: The large-cap medical equipment company has raised its dividend for 30 consecutive years and has increased yearly revenue for eight consecutive years.

A Closer Look at the Top Healthcare Stocks to Buy in 2024

Let’s take a further look at the top healthcare stocks that most investors are looking at this year:

1. UnitedHealthGroup – Best Healthcare Insurance Stock

UnitedHealthGroup is the largest health insurer in the U.S. and it sees cost savings as it steers its insurance clients toward its healthcare and specialty pharmacy offerings in its Optum business. The increase in healthcare spending because of an aging population in the U.S., should continue to drive growth for UnitedHealthGroup. It has more Medicare Advantage customers than anyone else in the U.S.

UNH graphicIn 2023, Optum’s revenue rose by 24%, while the benefits business, UnitedHealthcare, achieved a more modest growth rate of 13%. THe company had overall full-year revenue of $371.6 billion, up 14.6% and profit of $32.4 billion, an increase of 13.8%. This year, UnitedHealthGroup is predicting $400 billion in revenue, up 7.6%. 

The company raised its dividend by 13.9% last year to $1.88, the 13th consecutive year it has raised its dividend since it began offering a quarterly dividend in 2010. 

Ticker  One-year price change:  Dividend Yield P/E
NYSE: UNH 6.05% 1.44%  21.84

2. Intuitive Surgical –Taking Advantage of its Robotic Surgery Edge

Intuitive, as more of its surgery systems are installed in hospitals, is seeing its margins improve because servicing its machines is more profitable than selling them. The company’s equipment benefits from the growth in AI technology as it helps surgeons to continue to improve by analyzing best practices.

Intuitive comparison chartIn 2023, Intuitive had revenue of $7.12 billion, up 14% and net income of $1.79 billion, up 36%. There were 22% more procedures performed by the company’s da Vinci platform compared to 2022 and the company said it expects another jump between 13% and 16% in procedures this year. 

Intuitive benefits from a first-to-market advantage in robotic surgery as the expense of developing a competing system is a relatively high bar to others. The global surgical robots market size, estimated at $4.31 billion in 2023, is expected to have a compound annual growth rate (CAGR) of 9.5% through 2030, according to a report by Grand View Research.

Ticker  One-year price change:  Dividend Yield P/E
NASDAQ: ISRG 60.54% N/A  74.58

3. Eli Lilly – Still Time to Ride Stock’s Growth

Thanks to a huge lift by blockbuster drug tirzepatide, used in type-2 diabetes therapy Mounjaro and obesity drug Zepbound, Lilly had $34.1 billion in revenue in 2023, though EPS fell 16% to $5.80, because of money spent on acquisitions. In 2024, the company said it expects 2024 revenue in the range of $40.4 billion to $41.6 billion and EPS between $11.80 and $12.30.

Eli Lilly graphicWith all the hullabaloo around Mounjaro and Zepbound, it’s easy to overlook that the company just had two other drug approvals that could be future blockbusters. The first, Jaypirca, is used to treat patients with chronic lymphocytic leukemia (CLL) or small lymphocytic lymphoma (SLL) who have received at least two prior lines of therapy. The other is ulcerative colitis drug Omvoh. 

Two other relatively new drugs are also seeing strong growth. Oncology therapy Verzenio brought in $3.86 billion in 2023, up 56%, and antidiabetic medication Jardiance had $2.74 billion in 2023 sales, up 33%.

Lilly raised its quarterly dividend by 15, effective this year, to $1.30, the 10th consecutive year it has increased its dividend. It also repurchased $750 million of its stock.

Ticker  One-year price change:  Dividend Yield P/E
NYSE: LLY 127.55% 0.70%  128.09

4. Steris – Steady Revenue, Dividend Growth

Steris’s products are used in various healthcare settings to help prevent infections. The company seems to be benefiting from its purchase of the surgical instrumentation business it completed in August to buy from Becton, Dickinson and Company (NYSE: BDX). The $540 million deal included surgical instrumentation, laparoscopic instrumentation and sterilization container assets from Becton, Dickinson.

Steris graphicIn the third quarter of fiscal 2024, Steris reported revenue of $1.4 billion, up 15% and EPS of $1.42 compared to $1.24 in the same period last year. The company operates in four segments: Applied Sterilization Technologies; Dental; Healthcare; and Life Sciences, with the latter two seeing revenue climb by 19% and 21%, respectively.

The strong quarter prompted Steris to raise its annual forecast. It now expects 2024 revenue to rise between 10% and 11%, compared with an earlier estimate of between 9% and 10% growth. Steris raised its dividend by 10.6% in 2023 to $0.52 per share, the 18th straight year it has increased the dividend.

Ticker  One-year price change:  Dividend Yield P/E
NYSE: STE 24.69% 0.90%  40.68

5. Merck – Best Healthcare Stock for Long-Term Growth

Thanks to increased sales of cancer workhorse Keytruda and human papillomavirus (HPV) vaccine Gadasil, the company was able to make up for falling sales for COVID-19 antiviral Lagevrio last year. 

Merck graphicFull-year 2023 sales were $60.1 billion, up 1%, with Keytruda bringing in $25 billion, up 21% and Gardasil responsible for $8.9 billion, up 29%. Lagevrio’s sales declined 75% to $1.4 billion. Earnings per share (EPS) was $0.14, down 98%, due to a large number of acquisitions in the year.

The company has a huge pipeline that includes 110 programs, most of them in phase 2 or phase 3 trials, in addition to eight drugs that are under review. It has also been active in acquisitions to increase its pipeline. Most recently, it has spent $680 million to acquire Harpoon in order to get HPN328, which has shown promise in early trials to treat small-cell lung cancer and neuroendocrine tumors. 

Another cancer treatment, Blenrep, is coming off a strong Phase 3 trial, in which it reduced by more than half the risk of disease progression or death in people with relapsed or refractory multiple myeloma compared to Darzalex, made by Johnson & Johnson (NYSE: JNJ).

The company raised its quarterly dividend by 5.4% last year to $0.77, the 13th consecutive year it has increased its shareholders’ payout.  

Ticker  One-year price change:  Dividend Yield P/E
NYSE: MRK 16.59% 2.42%  886.96

6. Vertex Pharmaceuticals – Best Healthcare Stock Right Now

In 2023, Vertex’s product revenue grew 11% to $9.87 billion, thanks to the growth in sales of cystic fibrosis (CF) therapy Trikafta/Kaftrio, both in the U.S. and elsewhere. The company reported net income of $4.83 billion, up 9%. Now that it has more products on the way, there’s a potential for a huge long-term leap in revenue growth. The company said it expects revenue to grow by 8.8% in 2024, at the midpoint.

Vertex graphicVertex has been in the news because of its collaboration with CRISPR Therapeutics in developing Casgevy, a gene therapy to treat sickle cell disease (SCD) and transfusion-dependent beta thalassemia (TDT). However, the company’s strong CF franchise remains its main source of revenue and is expected to grow sometime later this year with the approval of vanzacaftor triple. CF is a progressive disease that can affect the reproductive tract, lungs, liver, GI tract, sinuses, sweat glands and the liver. 

The other news that could push the stock higher is non-opioid painkiller VX-548, which the company said it plans a regulatory submission for later this year in the U.S., Europe, and Canada. Analysts say the therapy has the potential to earn $5.1 billion in annual sales by 2030.

Ticker  One-year price change:  Dividend Yield P/E
NASDAQ: VRTX 43.89% N/A 30.30

7. AbbVie – Buy Now, Wait for the Rebound

At first glance, 2023 was a bad year for AbbVie, with revenue falling by 6.4%, to $54.3 billion, thanks mainly to declining Humira sales. Earnings per share dropped by 59% to $2.72, thanks to the impact of acquisitions, increased milestone expenses.

AbbVie chartHowever, over the past three quarters, revenue has risen each quarter, thanks to improving sales from the immunology duo of Skyrizi and Rinvoq, which the company said should combine for $27 billion in yearly sales by 2027, more than Humira ever brought in (the high being $21.2 billion in 2022). It will take time, but AbbVie expects to return to yearly revenue growth by 2025, according to CEO Richard Gonzales.

AbbVie recently raised its quarterly dividend by 4.7% to $1.55. Since the company split off from Abbott Labs (NYSE: ABT) in 2013, AbbVie has raised its dividend by 285% and counting its time as part of Abbott Labs, it is a Dividend Aristocrat that has raised its dividend for more than 25 consecutive years.

Ticker  One-year price change:  Dividend Yield P/E
NYSE: ABBV 15.96% 3.55%  47.96

8. Bruker Corporation – Best Healthcare Stock for Biotech Growth

Bruker’s sales of specialized laboratory equipment should benefit from the rise in cell therapies and proteomics, the study of proteins connected to diseases, especially with the growing trend of personalized medicine increasingly used to treat cancers, neurodegenerative diseases and genetic conditions that are often unique to a particular patient.

Bruker graphicIts 2023 revenue was $2.96 billion, up 17.1% and EPS was $2.90, compared to $1.99 in 2022. It’s the third consecutive year of double-digit EPS growth for the company.

Since the start of the year, Bruker has stepped up its acquisitions. On Jan. 3, it said it was acquiring Nion, a maker of high-end scanning transmission electron microscopes (STEM). On Jan. 4, it said it was buying Canadian company Tornado Spectral Systems, which makes process Raman instruments. 

Then, on Jan. 25, it said it was acquiring  Chemspeed Technologies, a Swiss maker of automated laboratory R&D and quality control workflow solutions. And on Feb. 7, it unveiled a deal to buy the Japanese company Nanophoton Corporation, known for its advanced research Raman microscopes. 

Ticker  One-year price change:  Dividend Yield P/E
NASDAQ: BRKR 13.58% 0.25%  27.51

9. GSK – Improved Margins, Impressive Dividend

GSK reported 2023 revenue of $37.7 billion, up 5%, despite declining sales for its COVID-19 therapies. EPS was $1.49, up 16%. GSK saw a 25% jump in vaccine sales, to $12.3 billion in revenue, led by $4.3 billion for shingles vaccine Shingrix, up 17% over the prior year. The company’s RSV vaccine Arexvy became a blockbuster, with $1.54 billion in sales in 2023.

GSK graphicGSK’s pipeline, which includes 71 vaccines and specialty medicines, produced four big product approvals last year, Arexvy, HIV preventative Apretude, myelofibrosis therapy Ojjaara and endometrial cancer drug Jemperli. 

Despite its strong financials, the company may be the best healthcare stock with a low P/E ratio. It trades at under 14 times earnings, below most of the stocks on this list and remains a potential bargain with an above-average dividend. The concern over several patent cliffs by the end of this decade has been eased because of the success of its pipeline.

Ticker  One-year price change:  Dividend Yield P/E
NYSE: GSK 16.19% 3.27%  14

10. West Pharmaceutical – Best Healthcare Stock for Dividend

The U.S.-based medical supply company grew revenue by 2.2% in 2023 to $2.95 billion, its eight consecutive year of revenue growth. It also had EPS of $7.88, up 1.9%. This year, the company said it expects another small gain in revenue, landing somewhere between $3 billion and $3.025 billion. It ended 2023 with a solid fourth quarter.

West pharma graphicWest doesn’t sell to the public, so the stock isn’t well-known, but it sells its products to leading generic, biologic and pharmaceutical companies. 

West, late last year, approved a boost of 5.3% for its quarterly dividend, beginning in the fourth quarter, to $0.20 per share. It’s the 34th consecutive year the company has increased its dividend.

Ticker  One-year price change:  Dividend Yield P/E
NYSE: WST 16.41% 0.22%  45.30

Where to Buy Healthcare Stocks

There are many places where you can buy top healthcare stocks using an online stock broker like eToro. At eToro, you’ll find hundreds of healthcare stocks from the U.S., Europe, and beyond. The broker offers shares of Merck, UnitedHealth, Vertex Pharmaceuticals, and many others.

In addition, eToro offers trading in healthcare-focused ETFs like Vanguard’s Health Care ETF and the iShares Healthcare Innovations ETF.

eToro Healthcare Stocks

Buying and selling stocks and ETFs at eToro is commission-free making it one of the most competitive platforms on the market. You can open an account with just $100 and start investing in healthcare stocks. Plus, there are conversion fees for non-USD deposits.

eToro helps you identify the top healthcare stocks to buy at the moment with a sentiment indicator, which tracks whether other users are buying or selling shares of a healthcare company. In addition, the broker offers a user-friendly charting platform so you can identify the best opportunities to buy and sell.

Another great thing about eToro is that it allows you to invest in healthcare stocks automatically with copy trading. You can mimic the portfolio of more experienced investors, including investors who focus on healthcare stocks.

eToro is available in more than 100 countries and regulated by authorities like the Financial Industry Regulatory Authority in the U.S. and the Financial Conduct Authority in the U.K..

Approx. Number of Shares Pricing System Cost to Trade Healthcare Shares
5,000+ Zero commission on all stocks, including U.K. shares Spread only – no fixed commissions are charged

Pros

  • Zero commission and competitive spreads
  • Strong regulation and reputation
  • Over 130 energy stocks
  • Copy trading tools allow you to copy successful traders
  • Excellent mobile app
  • 24/7 customer service

Cons

  • $5 withdrawal fee
  • $10 per month fee after 12 months of inactivity

What Are Healthcare Stocks?

Healthcare stocks offer investors a chance to own shares in companies that provide healthcare services or products. Healthcare stocks break down into three groups:

  • Pharmaceutical and biotech companies that develop, manufacture and sell medical therapies or drugs.
  • Healthcare equipment and services companies are those that provide medical equipment and services, everything from surgical instruments to robotic surgery systems to antibacterial products for use in a healthcare setting.
  • Medical insurance companies and managed care organizations: These companies can provide health insurance plans to individuals and businesses or contract with healthcare providers to deliver care to members of plans.

Why Invest in Healthcare Stocks?

Healthcare stocks have traditionally outperformed the market. The S&P 500 Healthcare Sector Index has returned an average of 12.2% per year since 1984, compared with an average of 10.0% per year for the S&P 500 Index. There are several reasons why that trend should hold:

There’s a Growing Need for Healthcare

The global population is aging, creating a need for more healthcare services and products. The rise of chronic diseases, such as diabetes, cancer and heart disease also is increasing the need for ongoing treatment, whether that be by medical therapy, drugs or medical equipment or a combination of the three.

Healthcare Stocks Often Deliver Dividends

Many healthcare companies pay dividends, which can provide a steady stream of income to their shareholders. Dividends are attractive to investors because they can provide a consistent source of passive income and because companies that offer dividends tend to be more established and better able to overcome short-term setbacks.

Healthcare Stocks Add Diversity to a Portfolio

Healthcare companies often have a global reach, giving them a diverse revenue stream and ameliorating risks connected with specific regions. There’s also a great deal of diversity within the sector, from healthcare insurers to drug companies, to medical supply companies, that can narrow the risk investors would normally face by specializing in a sector with less diversity.

How to Identify the Best Healthcare Stocks to Invest in

Healthcare stocks are not set-it-and-forget-it stocks, because the industry is always changing. You need to actively track the performance of the healthcare stocks in your portfolio based on several factors.

Does the company have a healthy R&D budget?

Healthcare is different from other sectors because research and development (R&D) is so important for these companies’ long-term success.

The best healthcare stocks generally are large-cap stocks, with plenty of free cash flow that enable them to have the ability to develop a pipeline or to buy smaller companies to grow revenue. A strong R&D pipeline with promising drug candidates or innovative medical devices can provide major long-term potential.

Use Key Financial Ratios

The same metrics that are used to compare other sectors also apply to healthcare stocks. Look for consistent revenue and earnings growth over years, showing a company’s ability to expand its market share and improve earnings.

Companies with low debt-to-equity levels can afford to meet their financial obligations and still find ways to grow. Beyond that, make sure a company’s price-to-earnings ratio isn’t too high compared to competitors to see if the stock is overpriced or still a bargain.

Look at Industry Trends

The rise in weight-loss drugs, including Eli Lilly’s tirzepatide, could adversely affect companies that specialize in medical equipment for diabetic patients and also slow the need for some heart surgeries.

Also, the rise in one-shot gene-editing therapies could drastically cut the need for other therapies that treat, but not cure, genetic disorders. Other long-term factors include the rise in Medical Advantage plans, the growing intervention by governments to reduce healthcare costs, and the use of messenger RNA (mRNA) therapies to treat diseases. 

Where to Get Healthcare Stock Tips and Insights

To learn more about healthcare stock picks, we recommend checking out AltIndex, a subscription service that uses artificial intelligence (AI) and alternative data

AltIndex Healthcare Graphic

This means that it analyzes social media and other websites, app downloads, customer satisfaction ratings, and other data regarding a company.

The data AltIndex gathers over time is then compared to other companies while using machine learning to come up with investment insights. Stocks are given a score from of 1 to 100, simplifying the analytical process for investors.

With more than 10k members, AltIndex is a widely used and trusted service. It provides over 100,000 unique daily stock insights and alerts, and has a very impressive win rate of 75% from its AI stock picks.

You can try AltIndex’s Starter Plan for just $29 a month and receive stock picks directly to your email, as well many other useful features.

Conclusion

Long-term trends point to potential growth in the healthcare sector. A variety of healthcare stocks can help balance your portfolio. It makes sense for investors to own large-cap healthcare stocks that consistently deliver revenue growth and a respectable dividend. However, it also makes sense to buy shares in smaller companies, such as biotech firms, with huge potential because of their connections to growing trends, such as gene-editing.

Look for healthcare companies that are trading for valuations below similar competitors, so you don’t overpay for a stock. While companies with high price-to-equity ratios may still be worth investing in, it often makes sense to wait for a better price point. Healthcare stocks, because many therapies and products take a long time to develop, are usually best approached as long-term investments. 

FAQs

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References

https://www.census.gov/library/stories/2018/03/graying-america.html

https://www.unitedhealthgroup.com/investors/stock.html

https://www.grandviewresearch.com/industry-analysis/surgical-robot-market

https://investor.lilly.com/stock-information/dividends-splits

https://sterisplc.gcs-web.com/news-releases/news-release-details/steris-raises-dividend-052-share

https://www.merck.com/research/product-pipeline/

https://www.merck.com/news/merck-announces-first-quarter-2024-dividend/

https://www.barrons.com/articles/vertex-opioid-alternative-d726a852

https://www.fiercepharma.com/pharma/jpm23-abbvie-well-positioned-years-humira-biosimilar-attack

 

Jim Halley
Editor
Jim Halley
Editor

I am an experienced journalist who has also worked as an editor and writer at the Savannah Morning News, Salt Lake Tribune, USA Today, Stars and Stripes, and The Motley Fool. I spent the first half of my career in sports journalism, but in recent years have switched to writing about my other passion, stocks, particularly healthcare, real estate and consumer staples stocks. I've won numerous journalism awards from the Associated Press and state press associations and have been a judge for the Georgia Sportswriters Association. I've written one non-fiction book, Just One More Time, about Georgia Southern football, and…