With so much concern about the Federal Reserve and its decision-making implications for forward market trends, investors may do well targeting healthcare stocks. Fundamentally, the underlying sector represents a critical need. Recession or not, if you’re in trouble, you’re going to seek some kind of medical help. In many ways, healthcare enterprises benefit from a captive audience.
Another major factor bolstering defensive investing in the healthcare industry centers on the aging population. Most notably, you have the baby boomer generation, which represents the largest increase in the U.S. population. Later on, you’re going to have the millennial generation, the oldest of whom hit middle age. Let’s just be real – the older one gets, the more they demand health services.
Admittedly, there’s more than a touch of cynicism in this arena. But if you don’t mind this factor, investing in healthcare may be quite lucrative right now.
Kenvue (KVUE)
A consumer health company, Kenvue (NYSE:KVUE) represents a spinoff from industry stalwart Johnson & Johnson (NYSE:JNJ). When it comes to healthcare stocks to buy for defensive investing against upcoming market trends, both enterprises make strong arguments. However, I’m going to give the nod to Kenvue for its broad relevancies.
To be fair, KVUE arrived with much fanfare but eventually struggled. Since its public market debut, shares fell more than 7%. Nevertheless, with the underlying enterprise offering relevant, popular products in the categories of self-care, skin health, beauty, and essential health, KVUE should eventually rise higher.
For example, if the Fed decides to raise interest rates, many companies’ expansionary efforts may dwindle from higher borrowing costs. Further, layoffs may materialize, which would likely spark desperation in the workforce. That might mean a return to the office, which cynically would benefit categories like skin health.
Plus, pressure in the consumer economy may lead to more instances of self-care (as opposed to clinical care). This too should help KVUE, making it one of the top ideas for investing in healthcare.
Novo Nordisk (NVO)
A delicate topic, it’s unavoidable that waistlines are getting bigger, which cynically supports the case of Novo Nordisk (NYSE:NVO) as one of the healthcare stocks to buy. According to Market.us, the global obesity treatment market size reached approximately $5.65 billion last year. By 2032, this segment will soar to a valuation of $15.09 billion. Further, North America presently dominates the arena with a 54% market share.
Fundamentally, this framework bolsters Novo Nordisk since obesity-related therapeutics is one of the company’s specialties. Therefore, it’s not surprising that NVO ranks among the top ideas within the healthcare industry. Since the beginning of this year, shares popped up nearly 17%. Over the trailing one-year period, NVO gained nearly 42%.
Because of the outperformance, I must say that NVO isn’t exactly cheap. Right now, the market prices shares at a forward multiple of 30.49 times. Nevertheless, the company benefits from a three-year revenue growth rate (per share basis) of 14.9%, above 60.76% of its peers. Also, it’s consistently profitable with a trailing-year net margin of 32.47%.
McKesson (MCK)
A global leader in healthcare supply chain management solutions, McKesson (NYSE:MCK) also specializes in retail pharmacy, community oncology/specialty care, and healthcare information solutions. Per its corporate profile, McKesson partners with pharmaceutical manufacturers, providers, pharmacies, governments, and other organizations in healthcare to help provide the right medicines, medical products, and healthcare services to the right patients quickly and effectively.
Because of its wide reach and relevancy, MCK easily ranks among healthcare stocks for defensive investing. No matter what challenges materialize in the economy, people will always have medical needs, particularly as the population ages. Therefore, while it’s not a blistering winner, it gets the job done in the charts. Since the Jan. opener, MCK moved up over 9%. In the training year, it swung higher to a return of nearly 26%.
Priced at a forward multiple of 15.34X, McKesson shares trade right at fair value for the underlying medical distribution industry. While you’re not necessarily getting an outright discount, the company prints a robust three-year revenue rate of 15.2%. Also, it’s consistently profitable, making it an ideal play amid shifting market trends.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
