In this episode I review the top 4 healthcare stocks in the market today.
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Hi guys and welcome to another video. Now, if you are looking for the best healthcare stocks to buy now you will want to look at the health stocks I have got for you today.
The most important healthcare story of 2020 was COVID-19 without a doubt. It was an event with few peers and it challenged some parts of the sector while elevating others. And in one way or another COVID will most likely have an impact on many of 2021 its best healthcare stocks.
As of today, the globe has suffered 73.6 million coronavirus cases causing 1.6 million deaths. That includes 16.8 million cases here in the U S that have so far claimed the lives of 304.000 Americans. That's not to mention the additional adverse health effects the virus has had on millions of survivors.
Naturally, there are two types of healthcare companies that stand out as the biggest potential winners of 2021: companies that are able to produce a widely used vaccine or treatment for the virus and resilient firms that held tough through the worst and can benefit from a gradual return to normalcy.
So let’s explore 4 of the best healthcare stocks to buy for 2021. But before we get started, if you are new to my channel please subscribe and hit that bell notification so you will know when I release more stock trading tips and make sure you stay to the end so you don’t miss out on some of these promising healthcare stocks.
The first one up is United Health Group. Last fall, United Health Group was struggling to deliver any kind of performance for its shareholders due to the threat it faced from potential "Medicare for All" proposals by Democratic presidential candidates.
Thankfully for UnitedHealth, Joe Biden became the Democratic nominee over the summer and subsequently president-elect. Managed-care stocks will do better under Biden who's against Medicare for All and United Healthcare might end up being one of the best healthcare stocks of 2021.
However, while Biden is said to dislike a single-payer healthcare system he does believe in a "Medicare-like government option," which means as many as 23 million Americans could become eligible for Medicare or something similar.
UnitedHealth reported third-quarter results in October that included an 8% increase in revenue to $65.1 billion along with adjusted earnings per share of $3.51, down slightly from a year earlier. However, in the first nine months of fiscal 2020, its adjusted earnings per share grew by 30% year-over-year to $14.36.
In the first three quarters, UnitedHealth generated $16.1 billion in cash flow from its operations – a healthy 120% of its net income in the first nine months. United Health its ability to churn out so much cash means nothing but good things for its dividend which has rocketed 150% since the beginning of 2016.
Healthcare stock number 2 on my list is Johnson & Johnson. Johnson & Johnson , one of the market's largest healthcare stocks announced on October 27th that it would resume Phase 3 trials for its COVID-19 vaccine after a two-week pause prompted by a sick patient. The Data Safety and Monitoring Board found it safe to resume the trial because it could not find an exact cause for the patient's serious medical issue.
The company's Covid-19 vaccine candidate requires one dose and can be transported without requiring new or special infrastructure for global distribution. Meanwhile, Pfizer's more-hyped vaccine requires two doses and has stringent storage-temperature requirements.
In early November they announced that Aspen Pharmacare had agreed to manufacture its vaccine if successful. Based in South Africa, Aspen's factory can accommodate the manufacture of 300 million doses per year. The company's Port Elizabeth factory currently manufactures drugs for late-stage cancer, Parkinson's and several autoimmune illnesses.
Johnson & Johnson's stock has severely underperformed in 2020, up 3.4% in the last year including dividends. However, compared to its drug manufacturing peers it's up 1.2% on a relative basis.
Johnson & Johnson should be one of the best healthcare stocks in 2021 after an uneventful 2020 but there's no one screaming driver – the stock just has a lot of things going for it. Annual operational sales and earnings guidance for 2020, released in October, was higher than July forecasts. Analysts expect a 12% jump in earnings in 2021 and the stock is cheaper than the market at less than 17 times profit estimates.
The third healthcare stock is Alexion Pharmaceuticals. Alexion Pharmaceuticals didn't really light it up in 2020. Through mid-November it had a total return of 14 point 2 percent – that's better than the broader market by 2 percentage points but about 1% point lower than the broader biotech industry.
Still, Alexion is trying to set itself up for future success. In 2020, just as it did in 2019, Alexion has made a billion-dollar acquisition. In early July, it closed its $1.4 billion purchase of Portola Pharmaceuticals. The deal added depth in hematology, neurology and critical care while providing further diversification away from paroxysmal nocturnal hemoglobinuria drug Soliris which contributed 66% of Alexion's sales in the third quarter.
But what makes Alexion an attractive healthcare stock to buy for 2021 is the fact that not everyone was on board with the acquisition. Activist investor Elliott Management's UK subsidiary sent an open letter to Alexion's board in May criticizing the company's purchase of Portola Pharmaceuticals as well as Andexxa, its poorly performing bleeding drug launched in 2018.
Elliott believes Alexion should be sold to a strategic buyer in the pharmaceutical industry that can benefit from its pipeline of drugs while delivering top- and bottom-line growth. If Elliott gets its wish, 2021 could be a fruitful year for shareholders.
The last healthcare stock on my list is Intuitive Surgical. One of the major concerns facing Intuitive Surgical is the competitive threats from medical-tech heavyweights such as Medtronic and Johnson & Johnson. They've both been developing robotic surgical systems to compete with Intuitive's da Vinci platform.
Fortunately, COVID-19 has set their timelines back giving Intuitive some breathing room before competition heats up and analysts don't expect either company to bring something to market until 2022 at the earliest, so Intuitive is set up to be among the more lucrative health stocks of the year to come.
Despite a slowdown in surgical procedures earlier in the year due to COVID-19, Intuitive Surgical's third-quarter report suggests its business is getting back to pre-pandemic procedure levels. They grew by 7% year-over-year during quarter 3. However, it only shipped 195 da Vinci surgical systems in July through August and third-quarter non-GAAP net income came to $2.77 per share down from $3.43 a year ago.
Now, Intuitive finished the quarter with $6.4 billion in cash and zero debt and this sound balance sheet has allowed Intuitive Surgical to not only ride out COVID-19 but remain aggressive. In late October they launched Intuitive Ventures, a $100 million fund committed to making healthcare investments in other companies disrupting the industry.
So these are the best healthcare stocks for this month, thanks for watching and make sure to watch the next stock trading videos that should show up right about now.