3 best healthcare stocks to buy for February

0

According to Verified Market Research, the global healthcare industry is worth $3.3 trillion today and could reach $6.6 trillion by 2028, so you might want to consider having healthcare stocks in your portfolio. , especially if you are a long-term investor.

The good news is that these companies come in all sorts of forms, whether you’re looking for rapid growth or a big dividend check. There seem to be a lot of bargains on the market these days. Here are three different types of health care actions that stand out from the rest.

Growth Action: InMode

InMode (NASDAQ: INMD) builds medical equipment for minimally invasive aesthetic medical procedures. The devices use proprietary radio frequency (RF) technology to dissolve body fat under the face and skin. InMode’s technology prevents many patients from having plastic surgery, which is usually more expensive and can lead to scarring or a long recovery time.

Image source: Getty Images

The company sells globally and has an installed device base of 10,350 units. InMode derives approximately 90% of its revenue from the sale of the equipment itself and 10% from consumables and machine maintenance. Recurring revenue could become a bigger contributor over time as InMode’s installment base grows.

InMode is also growing while maintaining its profitability. In Q3 2021, the company grew revenue 58% year-over-year (YOY) to $94 million and posted net income of $44.7 million. That’s an impressive net profit margin of 47%. Meanwhile, the stock’s price-to-earnings ratio looks quite reasonable at 27 for such a rapidly growing profitable company. During the recent market correction, the stock fell about 50% from its highs, giving investors a solid chance to buy stocks.

Dividend Growth Stocks: Johnson & Johnson

Johnson & Johnson (NYSE:JNJ) is a healthcare conglomerate that offers investors “a bit of everything” in the industry. It sells pharmaceutical drugs, medical devices and consumer products. Revenues have increased by an average of 3% per year over the past decade; it’s not a fast-growing company, but it’s doing enough to keep increasing its dividend.

Investors can be reassured by this dividend, which is one of the most reliable of all public companies. Johnson & Johnson is a Dividend King, a stock that has paid and increased its dividend for 59 consecutive years. The company’s balance sheet is rated AAA by major credit bureaus, one of only of them with this rating higher than even the US government!

While there are no guarantees in life, Johnson & Johnson’s 2.5% dividend yield is pretty close. At the same time, investors should be aware that J&J still faces lawsuits over its role in the opioid epidemic as well as cancer allegations related to its talcum powder.

The stock itself is trading at a P/E of 22, which might not be cheap considering InMode is trading at a modest premium to it while rising much faster. However, investors have often placed a more expensive valuation on Johnson & Johnson for its top-notch quality and strong financials. The company also plans to spin off its consumer products business, which could unlock more value for shareholders as an independent company.

High Yield Stocks: AbbVie

AbbVie (NYSE: ABBV) is a pharmaceutical company that manufactures prescription products, including Botox and Humira (the world’s top-selling drug). AbbVie’s nearly $250 billion market capitalization makes it one of the largest companies in the pharmaceutical industry. Having size and deep pockets on your side can be an advantage in pharmaceuticals, where drugs cost millions to develop and could fall apart in the FDA approval process. AbbVie has a large pipeline that gives it plenty of chances to find the next “blockbuster” like Humira that brings in billions in revenue.

The company also has a long history of dividends, dating back to when it was part of Abbott Laboratories before its 2012 split. AbbVie’s dividend yield is 4%, exceeding most bond and savings account rates, and has also been aggressively increased by management, increasing an average of 18% per year over the past five years. This combination of yield and growth makes AbbVie a potential dividend investor’s dream stock.

Humira contributed 35% of AbbVie’s Q4 2021 revenue and loses patent protection in 2023, allowing copycat generic drugs to enter the market. AbbVie has struggled to offset what will be a possible drop in Humira sales, but the market has further reduced inventory ahead of this challenge. The shares are trading at a P/E ratio of just 11, which seems cheap given that AbbVie’s earnings per share in 2021 were up 20% from a year earlier. If AbbVie’s emerging pharmaceuticals can eventually offset most of Humira’s losses, the current valuation could be an excellent entry point for a long-term position.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

Share.

Comments are closed.