Why now might be the best time to invest in health care stocks

Anjalee Khemlani
·Senior Reporter
Updated

Some of the biggest health care stocks have taken a beating in the past few years, as Congressional scrutiny, price pressures, and high-profile court cases are taking their toll.

The health sector is typically seen as a safe bet due to its consistent growth in the past. And with the U.S. spending on health care projected to reach $4 trillion in the coming year, that trend is likely to continue.

Despite its strength, it still lags the market, according to John Burke, owner of Burke Financial Strategies.

CHICAGO, IL - APRIL 14: Tylenol, which contains acetaminophen, is shown on April 14, 2015 in Chicago, Illinois. New research has shown that acetaminophen, which is found in many over-the-counter painkillers, can dull feelings of pleasure. Previous research found that the medication had a similar effect with feelings of dread. (Photo Illustration by Scott Olson/Getty Images)
CHICAGO, IL - APRIL 14: Tylenol, which contains acetaminophen, is shown on April 14, 2015 in Chicago, Illinois. (Photo Illustration by Scott Olson/Getty Images)

In the past several years, health care stocks including insurers and pharmaceutical companies have been hit by uncertainty over the Affordable Care Act, the push for Medicare for All, and the specter of tighter regulation, as well as executive orders from President Donald Trump and the multi-district opioid litigation.

In addition, an increasingly price-sensitive patient population is demanding change, and has put drug companies and insurance companies on the defense.

That may mean some good bargains, according to analysts.

“If you look at the health care sector for example, which has lagged behind, really, for two of the last three years now,” Burke told Yahoo Finance’s The First Trade.

“And health care is interesting because the health care sector and the technology sector are the only two sectors that provide consistent growth — topline growth above 5% — over the last 10 years.

Technology stocks are of course very much loved this year, health care stocks not so much, yet health care is something that we — as Baby Boomers get older — as we get older we need more of so that revenue growth should continue, so there are some great bargains in that sector as well.”

Meanwhile, the subsection of the sector that has driven growth and performed the best has been the biotech space.

Anjalee Khemlani is a reporter at Yahoo Finance. Follow her on Twitter: @AnjKhem

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