3 obvious stocks to buy in the healthcare industry

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Iinvestors love health actions both in bull markets and in uncertain times, but not all investments are dunks. Additionally, a stock that is perfect for one investor may not be suitable for another, so obviously it should match your specific situation.

The following three healthcare-related stocks have a handful of specific characteristics that make them excellent candidates for different roles in your investment portfolio.

1. CVS

CVS Health (NYSE: CVS) is a diversified healthcare company that operates a chain of pharmacies, a management of pharmaceutical benefits company, and a major health insurance company since its acquisition in 2017 from Aetna. This stock is not a dynamic biotech that will quadruple overnight, but it is a fundamentally strong value stock that can bring stability and income to your portfolio. These characteristics may be particularly desirable for retirees and risk averse investors.

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No segment contributed more than 56% of total CVS revenue in the first half of 2021. This diversification creates a business that is harder to disrupt, so cash flow is more predictable. CVS is also considered a defensive stock, as demand for its products and services fluctuates little with economic cycles.

CVS Health’s limited growth potential and its very modest valuation make it a valuable stock par excellence. It is trading at a futures P / E ratio of just 10.5 and price / book ratio from 1.5. These are exceptionally low valuation ratios in today’s stock market for companies that aren’t struggling. CVS also pays an attractive dividend yield of 2.3%, and the low payout ratio of 36.6% indicates that the company is generating more than enough profit and cash flow to sustain and increase the dividend.

CVS will not be the stock that generates the most growth in your portfolio. However, this is a no-brainer due to its stable operations and reliable cash flow that is distributed to investors on a quarterly basis.

2. Veeva systems

Veeva Systems (NYSE: VEEV) is a great healthcare stock for growth investors who don’t want to be too speculative in our current high valuation market. Veeva provides cloud-based software solutions to life science organizations, such as biotechnology companies. Its suite of products is essential in clinical data management, regulatory compliance and customer relationship management.

Veeva is exciting because of its simple dominance in a high growth niche. The main potential competitors in the cloud software industry do not share Veeva’s focus and expertise in the life sciences. Direct competitors in the same market niche are all considerably smaller, putting them at a disadvantage. The company reports income retention greater than 100%, which means customers not only choose to stay with Veeva, but extend their relationship across different product lines.

Veeva has become an integral part of the operations of a number of leading customers, and its market leadership appears secure. The global branded pharmaceutical and biotech industry is expected to grow by more than 10% on average over the next decade. As an unrivaled leader, Veeva should reap the rewards.

The only caveat here is the stock’s relatively high valuation. Veeva Systems’ forward P / E ratio of over 70 is high, even after adjusting for its strong growth forecast. Therefore, this growth stock is particularly suitable for investors looking for long-term upside potential. It is likely to be more volatile in the short term than value stocks such as CVS, so make sure your investment portfolio is set up to resist these price fluctuations.

3. LTC properties

LTC Properties (NYSE: LTC) is a REIT which has 179 properties which are used for the health care of the elderly. About 100 of its properties are assisted living facilities, with the remainder being qualified nursing care. The REIT generates income from mortgage interest and the rental of properties to caregivers. While LTC Properties is not directly involved in the provision of healthcare or the development of medical technology, it is still driven by many of the same demographic and economic trends.

LTC has gone through a difficult time during the pandemic. Its facilities serve some of those most at risk for serious health problems associated with COVID-19, and several high-profile cases of outbreaks in elderly care facilities have made people skeptical of the safety in those homes. LTC Properties’ rental income fell by more than 20% for the whole of 2020.

Nonetheless, the REIT maintained its monthly distribution of $ 0.19 per share last year, and it has returned to revenue growth so far in 2021. operating funds (FFO) in the second quarter were equal to dividends from shareholders during those three months. An aging population and increasing life expectancy will drive demand for long-term care, and this industry is expected to grow by almost 7% per year over the next five years. LTC Properties could be a major beneficiary of this trend as a growing patient population creates greater cash flow that will eventually flow to owners of medical facilities. Like CVS, LTC Properties cannot be viewed as a growth investment. This is strictly an income game, and it’s worth a look for retirees.

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Ryan downie owns shares of Veeva Systems. The Motley Fool owns shares and recommends Veeva Systems. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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