The healthcare industry is watching the Trump presidency closely. President Trump's promise to repeal and replace Obamacare hit repeated stumbling blocks in Congress. Despite the uncertainty surrounding these efforts to overhaul the nation's healthcare system, a number of healthcare stocks rose dramatically throughout 2017. In fact, the Health Care Select Sector SPDR ETF (XLV), which is the largest exchange-traded fund (ETF) tracking the sector, returned an impressive 21.77% last year.
In this article, we take a look at three healthcare stocks that were solid performers throughout 2017 and that could offer additional upside in 2018. We chose stocks of companies that offer products that are in high demand or could be in high demand when they are approved by the Food and Drug Administration (FDA). It remains to be seen how the regulatory environment will progress for healthcare companies, but there are some clear winners that could continue to generate profits for investors. All figures are current as of April 7, 2018. (See also: Healthcare ETFs See Modestly Higher Valuations.)
Celgene Corporation (CELG)
Celgene has carved out a space in the treatment of cancer. It has products on the market currently that are in demand for fighting various cancers and inflammatory diseases. The company sells its products to markets worldwide. Forecasts suggest that spending on cancer treatments will reach $150 billion by the year 2020, and Celgene is likely to be one of the leaders in cancer care. Sales of its drugs are increasing dramatically.
The stock chart shows that Celgene had a high-volume breakout in June 2017 and broke out again in August 2017. The stock saw dramatic declines in October, affected in part by a downgrade from research firm Morgan Stanley. Celgene shares struggled to post gains into year end and then fell along with the broader markets in February. The company recently agreed to acquire immunotherapy specialist Juno Therapeutics, Inc. for approximately $9 billion, which could revitalize Celgene's product pipeline and boost revenues. (For more, see: How a Juno Takeover Could Boost Celgene.)
- Average Volume: 8,210,747
- Market Cap: $65.402 billion
- P/E Ratio (TTM): 23.89
- EPS (TTM): $3.64
- Dividend and Yield: N/A (N/A)
UnitedHealth Group Incorporated (UNH)
UnitedHealth is one of the more impressive players in the healthcare field. It offers healthcare plans to consumers and employers, and it also has plans for military personnel. Furthermore, the company offers Medicaid plans, children's plans and plans for the elderly. UnitedHealth has an extensive network of physicians and hospitals that use its plans. It also markets software and information technology.
The stock made a dramatic upward move in October 2016 and has climbed steadily from there. More recently, UnitedHealth stock increased sharply starting on Oct. 17, 2017, in a positive reaction to the company's third quarter earnings report. The market's positive response may be related to the company's solid guidance, which called for earnings growth of 13% to 16% in 2018, with a possible boost from new insurance products supported by the Trump administration. The recent sell-off could offer a buying opportunity for those investors that see healthy prospects for this major industry player. (See also: How UnitedHealth Group Makes Its Money.)
- Average Volume: 4,092,772
- Market Cap: $216.718 billion
- P/E Ratio (TTM): 20.89
- EPS (TTM): $10.72
- Dividend and Yield: $3.00 (1.39%)
Stryker Corporation (SYK)
Stryker markets medical equipment – this focus keeps it out of the debate about how much the government should dictate drug prices. The company has provided 10 uninterrupted years of revenue growth. Stryker markets to three healthcare areas: orthopedics, surgical equipment and supplies, and brain and spine surgery based on advanced technology.
In mid-November 2016, the stock started an upward march, and it remained in an uptrend through the end of 2017, eventually reaching an all-time high high of $170 in late January 2018 before moving downward with the rest of the market. Shares of Stryker recovered quickly after the correction and returned to near their January high before settling at current levels around $155. The stock's 50-day moving average remains well above its 200-day moving average, which is a bullish indicator. The company has been enhancing its growth potential via acquisitions, and in September 2017, Stryker acquired imaging technology firm NOVADAQ Technologies Inc. (For more, see: Stryker Corporation: A Strong Capital Position.)
- Average Volume: 1,340,018
- Market Cap: $57.896 billion
- P/E Ratio (TTM): 57.90
- EPS (TTM): $2.68
- Dividend and Yield: $1.88 (1.17%)
The Bottom Line
The healthcare industry is an iffy play under the best of circumstances. To be sure, a portion of the action on these three stocks last year was based on the belief that President Trump will be good for the sector. It is important to watch what happens from a political and regulatory standpoint, and investors should keep an eye out for increased earnings and higher revenues. These three stocks could do well in 2018. (For additional reading, check out: Investing in the Healthcare Sector.)
