Healthcare Stocks in 2022: Will They Yield Returns?

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If you’re ready to take more risks in your investments, buying stocks is a good start. Though even beginners can invest in stocks, its long-term returns and intimidating nature repels most beginners. But thanks to banks that offer a five-year corporate bond yield or similar securities, investment has been made so much easier to understand.

But what are the stocks you should buy? There are countless to choose from in every industry. Beginners typically focus on stable companies like fast-food chains and everyday consumer goods. However, experienced investors are, in fact, setting their sights on healthcare stocks today.

Because of the pandemic’s impact and lingering effects, it can be hard to believe that the healthcare sector is stable today. But research data suggests otherwise. Here’s why it might be good to invest in healthcare stocks next year:

The Rise of the Healthcare Sector

The pandemic might’ve shaken the healthcare sector, but it also paved the way for innovations. Doctors’ appointments and some treatments have moved online, allowing non-COVID-19 patients to continue receiving care without risking themselves. Moreover, the demand for healthcare has been steadily increasing even before the pandemic. In 2018, healthcare spending reached $8.3 trillion, which was 10% of the global GDP.

Things to Consider Before Investing in the Healthcare Sector

The healthcare sector is made up of different industries, such as:

  • Pharmaceutical
  • Healthcare devices
  • Health insurance
  • Hospitals and clinics

As such, many variables affect investments in this sector. These include positive trends related to demographics and negative trends associated with reimbursements. Your investments can yield returns from the healthcare sector as a whole or its individual industries.

Positive trends in healthcare include:

  • The aging population and baby boomers
  • People with chronic conditions who live longer
  • Rising cases of obesity and diabetes
  • Technological innovations
  • The global reach of disease
  • Personalized medicine

Though the trends sound negative, they’re advantageous from the perspective of the healthcare sector. For example, the aging population gives more jobs to nurses and home health providers. The prevalence of diabetes and obesity boosts opportunities for dietitians. As a result, the specific healthcare industries profit more.

On the other hand, negative trends include:

  • Uninsured individuals
  • Cost controls
  • Consumerism

Uninsured individuals are less likely to seek healthcare, affecting the revenue of hospitals and clinics. Consumerism and cost control may help these individuals. Of course, it places healthcare providers at a disadvantage because it makes them collect less money.

However, it doesn’t mean that investors shouldn’t support affordable health plans. Even if they create negative trends, they encourage more people to seek healthcare. Ultimately, the sector will benefit from it and earn more income.

The Best Healthcare Stocks for 2022

  • UnitedHealth Group

UnitedHealth Group recently launched NavigateNOW, a new virtual healthcare plan. For now, it’s only available in select employers in nine U.S. markets. It’s 15% cheaper than traditional health plans but allows in-person and virtual care.

In the third quarter of 2021, UnitedHealth Group paid out $1.4 billion in dividends and bought back $1.1 billion of its stock. The company expects to earn between $18.65 and $18.90 per share this year. Plus, UnitedHealth Group’s YTD (year-to-date) total return is 29.2%, and its five-year annual total return is 25.5%.

  • Intuitive Surgical

The recent leadership changes in Intuitive Surgical increased the value of its stocks. The company increased its sales from $1.08 billion to $1.4 billion. It earned $1.19 per share, which is nearly 30% higher than itsearnings the year prior, of only 92 cents per share.

Overall, Intuitive Surgical YTD’s total return is 32.5%, almost 45% higher than last year. However, their stock prices are high, making them unattractive for beginners.

  • Danaher

Danaher’s stock value grew by 39.7% for the year to date. Its five-year annual total return is at 31.4%. They recently acquired Aldevron, a biotech company from North Dakota that caters to Moderna. As a result, Danaher’s revenue saw a 23% year-over-year increase. Their shares earned $2.39 each. What’s more, its free cash flow in the first nine months of 2021 grew from $3.53 billion to $5.2 billion.

  • Idexx Laboratories

The veterinary industry caught the spotlight as well. Idexx Laboratories, a provider of veterinary diagnostics and software products, saw a 25.6% YTD increase over the past year. In the third quarter of 2021, their revenue reached $810.4 million, 12.3% higher than last year’s. It made their shares earn $1.96 each, 12% higher than last year’s.

Before investing in any of these stocks, though, consult your financial advisor, especially if you’re a beginner. For seasoned investors, expensive stocks don’t always mean good stocks. They sometimes like to buy declining stocks then wait for them to bounce back. Investing requires strategy, so jump into it only if you have a game plan.