Healthcare has pushed its way to the forefront of everyone's mind over the last three years. Every single country has been forced to evaluate its healthcare systems and streamline processes for patient treatment in the wake of the pandemic.
While the pandemic itself was a sad experience for the world, it created a boom in the healthcare sector of the market. Investors in companies like Moderna, Inc. (NASDAQ : MRNA), Pfizer Inc. (NYSE : PFE) and other big pharmaceutical producers suddenly found their profits growing by leaps and bounds.
The big question is "what now?" Is healthcare going to continue to be a profitable investment going forward; especially with the economy on such unstable ground? USNews believes it will be, and recently published an article regarding which stocks to watch in the coming months.
2021 VS 2022 Performance
The healthcare sector as a whole had a rather slow and lagging year in 2021. While companies directly related to vaccine production saw burgeoning growth in their profits, the entire sector did not share that wealth. Instead, the sector underperformed.
However, that was not the case in 2022. This year, the healthcare sector outpaced the S&P 500, and this has left investors with a bullish outlook moving into the new year. Some companies are still riding the coattails of the pandemic, while others are forging their own path in the newfound growth spurt.
Looking Ahead
With the sector outperforming this year, investors are eager to sink their funds into companies that promise growth. However, let's not throw caution to the wind and think that every promise will be fulfilled.
While the sector's overall performance may be stellar, there are still some areas of healthcare investors should consider steering clear of in the coming year.
According to an article for Alliance Bernstein, investors should seek to put their funds in companies that are more concerned with the business side of healthcare than the science side. The author of the article is Vinay Thapar, the Co-Chief Investment Officer and Senior Research Analyst for the company.
He writes "Investors need to look beyond cutting-edge equipment or biotechnology research to understand how innovation will reshape the industry." Thapar explains that investors need to be well versed in the companies they intend to invest in, so they can make sure their money is being wisely invested. He says "Still, powerful innovations don’t always make economic sense. Understanding how pricing points are determined for a new product or service is essential to gauge a company’s earnings potential."
This is sound advice for any sector of investing, but especially true in the healthcare sector. Knowing what kind of earning potential your investment has beforehand can make a big difference in investment strategy.
These Companies Should Be On Your Watchlist
According to The Street, these companies should be investments you consider making in 2023. Each of them have their own benefits and risks, so investors should weigh them out before deciding where to sink their money.
Veeva Systems (NYSE : VEEV) tops their list of important companies to watch going forward. The software firm provides cloud based management software for companies involved in both life science and pharmaceutical work. The author writes "Veeva has made itself virtually indispensable to these complex, highly regulated businesses by creating industry-specific cloud solutions that suit their needs in ways that more widely adopted cloud platforms cannot." This means that Veeva is one company in the medical sector that has a corner on the market and is set to make big profits going forward.
HCA Healthcare (NYSE : HCA) takes the second slot on the list from The Street. This company owns and operates 182 hospitals, as well as 2,300 sites that provide surgical and ambulatory care across the country. These include urgent care clinics, free standing emergency rooms and surgical offices. While HCA shares have faced a little pressure in recent weeks, due to upper management not being willing to provide early guidance for 2023, the stock is one of the best stocks in the hospital investment category.
We cannot talk about healthcare stocks worth investing in, without mentioning Teladoc Health (NYSE : TDOC). Tele healthcare has become the industry norm over the last few years, with more and more patients opting to skip the line at the emergency room for mild medical issues and instead speak with a doctor online. Teladoc has capitalized on that move and built a very successful business around it. The company touts itself as "world leader in whole-person virtual care," and they are not wrong. Using their platform patients can receive services that range from primary care to mental health consultations. This is one company that will continue to be indispensable to the healthcare system for a long time to come.
Intuitive Surgical (NASDAQ : ISRG) is next on the list, and this company provides a service that has made investors good profits. The company specializes in the manufacture and sale of robotic surgery equipment. By providing the initial equipment and subsequent replacement parts the company has shown continuous growth in the sector. While robotic procedures account for less than 3% of overall surgeries performed, the company has provided equipment for more than 10 million of these procedures to date, driving their value upwards.
Why The Healthcare Sector Is A Good Investment
One question potential investors may ask is "why should I invest in healthcare?" The answer is really quite simple. It is a good investment that breeds profit. The healthcare sector contains investment potential for literally every type of investor.
No matter whether you prefer to invest in stable companies with a long history of success, or wish to grab shares of an innovative startup company that promises to revolutionize healthcare, you can find an investment that suits you.
The healthcare sector is an investment opportunity that will always provide a good place to find equity. We will need healthcare for our entire lives, making the providers a necessity. Necessity equals profitability.
Chase offers a great article here on things to consider if you are going to invest in the healthcare sector. By making a wise, well informed investment, you increase your potential for growth and earnings. Take the time to call your broker and get the information you need to make the right investment for your portfolio. The healthcare sector is an excellent choice for investing in high return stocks.
