Consider turning to health care to increase your returns. Even if the market is changing and some sectors are starting to underperform, …
Consider turning to health care to increase your returns.
Even as the market moves and some sectors start to underperform, there are still opportunities if you look in the right places. “Healthcare funds are growing faster than the market,” says Stuart Michelson, professor of finance at Stetson University. The healthcare industry has historically demonstrated defensive characteristics by providing a stable dividend component and generating less volatility than the broader market, said Todd Rosenbluth, head of research on exchange-traded funds and funds. mutual funds at CFRA Research, based in New York. “The sector has performed well in a strong year for equities, and there are many attractive investments in healthcare,” he said. Here are six stocks and ETFs to consider adding to your portfolio.
Johnson & Johnson (ticker: JNJ)
Johnson & Johnson, the household name for personal care products, is a pharmaceutical giant that manufactures drugs to treat serious and chronic illnesses and medical conditions such as rheumatoid arthritis, HIV, Alzheimer’s disease, cancer of the lung and diabetes. The company has announced that its CEO Alex Gorsky will step down in January 2022. He will be replaced by Joaquin Duato, vice chairman of the company’s executive committee. The company’s COVID-19 vaccine remains the only one-shot option in the United States, however, JNJ faces headwinds, including lawsuits against consumers. In June, Johnson & Johnson announced it would pay $ 263 million to settle a lawsuit against New York State over its role in the opioid crisis. Despite its challenges, the title is undervalued, says Rosenbluth.
Pfizer Inc. (PFE)
Pharmaceutical giant Pfizer also remains undervalued, according to Rosenbluth. The company is making one of the COVID-19 vaccines and developing an antiviral pill to reduce symptoms of COVID-19 in people who are already infected. The company anticipates that advanced data on the oral antiviral will be available in several months. Positive data and approval from the Food and Drug Administration means the drug could provide a significant revenue opportunity for the company, as an oral antiviral could lead to widespread use and slow infection rates. Jefferies analysts estimate that an antiviral treatment for COVID-19 could be a $ 10 billion a year drug if it is practical and effective.
Cardinal Health Inc. (CAH)
Cardinal Health is a healthcare company showing potential even if it is on a more moderate size, Rosenbluth says. The company reported fourth-quarter revenue of $ 42.6 billion, a gain of 16%, although pharma segment profit margins did not increase. Cardinal Health will pay $ 6.4 billion over 18 years as part of its settlement agreement with state and local government entities over claims it contributed to the opioid crisis. CEO Mike Kaufmann said the company will increase its cash flow generation through the divestiture of the Cordis business, the extension of its Red Oak supply agreement with CVS Health and the identification of 250 millions of dollars in additional savings opportunities. Cardinal Health’s stock price is around $ 51, down from its high of $ 62.96 in March.
SPDR Selected Healthcare Sector ETF (XLV)
The performance of the Health Care Select Sector SPDR ETF offers modest risks with high return potential and low costs compared to its sector equity ETF counterparts, Rosenbluth said. The ETF owns stocks such as Johnson & Johnson, UnitedHealth Group Inc. (UNH), Pfizer, Abbott Laboratories (ABT) and Thermo Fisher Scientific Inc. (TMO) which all produce strong dividend yields. “Given the wide range of attractive stocks, we like both the Health Care Select Sector SPDR ETF and the Invesco S&P 500 Equal Weight Care (RYH) ETF,” he says. “These ETFs hold the same stocks, but RYH owns an equal amount of money rather than favoring megacaps.” The expense ratio is 0.12%, the one-year return is 26.7%, and the three-year return is 13.8%.
IShares US Healthcare Providers ETF (IHF)
The iShares US Healthcare Providers ETF offers a more concentrated portfolio with companies that focus on health insurance, diagnostics and specialty treatments, such as UnitedHealth Group, CVS Health Corp. (CVS), Anthem Inc. (ANTM) and Centene Corp. (CNC). The expense ratio is slightly higher at 0.42%, and the fund has a one-year return of 31.7% and a three-year return of 12.2%. Most investors should invest 5-10% of their portfolio in the healthcare industry, as the industry is booming due to aging Americans and higher costs for diagnosis and treatment, Michelson says. Investing a higher percentage in the sector can create “excessive sector risk in an investor’s portfolio,” he says.
Vanguard Health Care ETF (VHT)
The Vanguard Health Care ETF tracks the performance of a benchmark index of large, medium and small US healthcare companies. There are 455 stocks in the index, and 24% is allocated to healthcare equipment and pharmaceutical companies while 10.3% is allocated to life science tools and services companies. The top three holdings are Johnson & Johnson, UnitedHealth Group and Pfizer. The expense ratio is 0.10%, the one-year return is 27%, and the three-year return is 14.3%. Healthcare is a defensive industry because it has a lower correlation with other major industries, Michelson says. “Many pharmaceutical companies pay regular and growing dividends,” he says. “Companies that pay dividends on a regular basis tend to be more stable and produce stable cash flows under varying market conditions.”
Best healthcare stocks and ETFs to buy:
– Johnson & Johnson (JNJ)
– Pfizer Inc. (PFE)
– Cardinal Health Inc. (CAH)
– Healthcare Select Sector SPDR ETF (XLV)
– ETF iShares US Health Care Providers (IHF)
– Vanguard Health Care ETF (VHT)
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6 best healthcare stocks and ETFs to buy originally appeared on usnews.com