2019's top 10 health care stocks for investors.
Anyone who invests in the stock market should be curious about the best health care stocks to buy. Along with college tuition, health care is one of the few economic segments where spending has risen far faster than inflation. Both of those trends are fundamentally unsustainable, but until Washington does something about it -- and as long as Americans' own health care bills keep rising -- individual investors might as well profit from the sector themselves. In a sector with enormous variety, here are 10 of the best health care stocks to buy for 2019.
CVS Health Corp. (NYSE: CVS)
CVS recently completed its acquisition of Aetna, transforming the pharmacy chain into a company consumers truly haven't seen before. CVS' plans to start emphasizing its MinuteClinics for Aetna-insured patients will not merely cut costs and boost margins for its Aetna division but also give Aetna potential cost advantages compared to rival insurers. Existing Aetna customers should also be incentivized to frequent CVS stores for simple health care needs, increasing foot traffic, prescription revenue, retail sales and customer loyalty for CVS. These advantages make CVS, which pays a 2.5 percent dividend and trades for 11 times forward earnings, one of the best health care stocks to buy for 2019.
Centene Corp. (CNC)
While CVS' tie-up with Aetna is bad news for Walgreens Boots Alliance (WBA), it does little to immediately impact the bright future of Centene, the St. Louis, Missouri-based health insurer with a niche focus on the uninsured and underinsured. Government-subsidized programs like Medicaid, coupled with Obamacare's expansion of the addressable market, make CNC one of the best stocks to buy for 2019: revenue and earnings per share are expected to rise 16 and 19 percent, respectively, in 2019. CNC is also a pharmacy benefit manager, providing the increasingly valuable service of negotiating lower drug prices for its members due to volume buying -- and then taking a cut for itself.
Johnson & Johnson (JNJ)
Named as one of U.S. News' 10 best stocks to buy for 2019, Johnson & Johnson is one of the most firmly entrenched businesses on the planet. A combination of trusted brand names, scale, distribution advantages and patent protection gives JNJ the sort of lasting power and cash flows few companies ever enjoy. Johnson & Johnson's pharmaceutical division, accounting for 45 percent of overall sales, is also JNJ's fastest-growing segment, and with dozens of late-stage drugs in its pipeline -- not to mention research and development efforts, potential licensing agreements and acquisition opportunities -- expect JNJ to keep investing in pharma while its other multibillion-dollar divisions, medical devices and consumer, hold steady.
Icon PLC (ICLR)
Although it's not Johnson & Johnson, Icon is no slouch itself; analysts expect the $8 billion medical research company to grow earnings per share and revenue by 12 and 8 percent, respectively, in 2019. What makes ICLR one of the best health care stocks to buy for 2019 isn't just a modest growth rate, though. A contract research organization, Icon helps drugmakers coordinate and conduct the all-important clinical trials required for regulatory approval in the U.S., Europe and other markets. This is an essential service that is often cheapest outsourced, making ICLR an attractive play on the continued growth of pharma, biotech and medical devices.
AbbVie owns the single best-selling drug in the entire world: Humira, AbbVie's blockbuster treatment for arthritis, Crohn's disease, ulcerative colitis, plaque psoriasis and other indications. Last quarter, ABBV reported $3.5 billion in Humira sales alone, as the competition for a drug like Humira is sparse and the company knows it. Two pen-based doses of the injected drug, which usually must be taken every two weeks, cost roughly $5,000 without insurance. Trading at 10 times forward earnings, ABBV also boasts a 4.8 percent dividend and a remarkable 45-year streak of increasing its dividend payment annually. For those reasons, ABBV is one of the best health care stocks to buy for 2019.
Zoetis, since its 2013 spin-off from Pfizer (PFE), has done quite well for itself as a standalone company. As a market leader in animal medicine, Zoetis is differentiated in a market full of companies trying to do the same thing. In its most recent quarter, revenue grew 10 percent and earnings per share jumped 16 percent, as sales of companion animal products in the U.S. grew 20 percent. Dermatology products and parasiticides drove much of the growth. Though livestock vaccines used to make up the majority of ZTS's business, the "bull market" in household pets, driven increasingly by millennials, makes Zoetis one of the best health care stocks to buy.
Align Technology (ALGN)
Next up is an $18 billion company with a promising future in the medical device market. Align Technology makes Invisalign, the popular invisible orthodontic product that's increasingly taking share from braces as a less-invasive way to correct crooked teeth. After slowing growth in the third quarter, ALGN stock fell more than 40 percent. Shares seem to have found their footing though, and with market share only around 13 percent, ALGN should still have years of potential growth ahead. Zero debt, plus a recent deal to take a large stake in up-and-coming competitor Smile Direct Club, underscore why ALGN is one of the best health care stocks to buy for 2019.
Becton, Dickinson and Co. (BDX)
One of the more conservative names on this list, Becton, Dickinson has spent well over 100 years earning its status as one of the top health care stocks to invest in. Founded in 1897, BDX is a leader in medical supplies and diagnostics, selling everything from anesthesia needles and antiseptic products to cervical cancer screening systems and kits for cell analysis. One of the rare "dividend aristocrats" to raise their dividend at least 25 consecutive years, BDX has been increasing its payout annually since Richard Nixon was president. Becton, Dickinson sees revenue growing between 5 and 6 percent, and profits advancing 10 percent, in fiscal 2019.
Despite an impressive rally in 2018, ANTM still looks like one of the best health care stocks to buy for 2019. The $75 billion health care plan provider trades at a very reasonable 22 times earnings and 16 times forward earnings, paying a very modest 1 percent dividend to boot. With the 2018 midterm elections all but guaranteeing the Affordable Care Act is safe for at least another two years, health insurers like Anthem have been significantly de-risked as investments. Longer term, Anthem's been working hard to build out its own PBM, which it plans to debut in 2020. That business can only improve ANTM growth prospects.
BioMarin Pharmaceutical (BMRN)
If there's one thing you should know about the $18 billion San Rafael, California-based biotechnology company, it's that BioMarin is a far riskier bet than the other nine stocks on this list. That greater risk translates to greater potential reward, but BMRN still isn't something you want to bet the farm on. BioMarin focuses on rare diseases and so-called "orphan drugs," which affect very small portions of the population but usually end up having extremely high price tags when approved. BioMarin also gets tax benefits to incentivize orphan drug production, and currently has seven on the market. BMRN also has two Phase 3 drugs in its pipeline.