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 likely will have an impact on many of 2021’s best healthcare stocks.
By mid-November 2020, the globe had suffered 57 million coronavirus cases causing nearly 1.4 million deaths. That includes 11.6 million cases here in the U.S. that have so far claimed the lives of 250,000 Americans. That’s not to mention the additional adverse health effects the virus has had on millions of survivors.
Naturally, then, 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.
Here, we explore 13 of the best healthcare stocks to buy for 2021. Some of these picks are in the later stages of developing COVID products, while others sport business models that are designed to do well in most market conditions (but should enjoy a bump when the virus finally begins to recede).
Data is as of Nov. 18. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price. Analysts’ opinions courtesy of S&P Global Market Intelligence.
- Market value: $326.9 billion
- Dividend yield: 1.5%
- Analysts’ opinion: 15 Strong Buy, 7 Buy, 4 Hold, 1 Sell, 0 Strong Sell
What a difference a year makes.
Last fall, UnitedHealth Group (UNH, $344.51) 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 UNH 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, UNH’s 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. UNH’s ability to churn out so much cash means nothing but good things for its dividend, which has rocketed 150% since the beginning of 2016.
- Market value: $86.2 billion
- Dividend yield: N/A
- Analysts’ opinion: 6 Strong Buy, 4 Buy, 7 Hold, 0 Sell, 3 Strong Sell
One of the major concerns facing Intuitive Surgical (ISRG, $733.38) is the competitive threats from medical-tech heavyweights such as Medtronic (MDT) and Johnson & Johnson (JNJ). 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. Analysts don’t expect either company to bring something to market until 2022 at the earliest, so ISRG is set up to be among the more lucrative health stocks of the year to come.
“This gives (Intuitive) more of a land grab (opportunity) ahead of competitive robot launches,” SVB Leerink analysts wrote in July. “Even though capital purchasing over next 6-12 months is likely to be limited, there is now extra time to go penetrate the market when capital purchasing resumes ahead of competitive launches likely in the 2022-2024…