4 Healthcare Stocks to Buy and Hold for the Long Term

NYSE: NVS | Novartis AG  News, Ratings, and Charts

NVS – The healthcare sector in the United States is on the cusp of major growth. Factors such as positivity around the COVID-19 vaccine, an ageing U.S. population, and optimism over developments in the treatment of fatal diseases in general are brightening the prospects for healthcare stocks. Novartis AG (NVS), Abbott Laboratories (ABT), Merck & Company, Inc (MRK), and Eli Lilly and Company (LLY) are cases in point. They are top players in the healthcare space that investors could buy now and hold for the long term.

Since the COVID-19 public health crisis began last year, investors have been closely watching healthcare stocks. In the initial stages of the pandemic, the focus was on the prospects for more accurate diagnosis. Now, investors are tracking regulatory approvals for vaccine candidates developed by the pharmaceutical companies.

But, in addition to  pharmaceutical companies, other healthcare players, such as medical device sellers, biotech, hospitals and diagnostic service providers, have been strong performers. In the wake of  positive news related to the COVID-19 vaccine, hopes are now growing for the development of cures for a variety of diseases, whether chronic or life threatening. In addition, an ageing U.S. population and rising healthcare costs are expected to boost the growth of the overall healthcare sector.

The CMS Office of the Actuary has projected that in the U.S., healthcare will account for 19.4% of GDP in 2027, up from 17.9% in 2017.

But investors that are seeking to benefit from the growth of the sector must look for companies offering a good mix of stability and growth. We think Novartis AG (NVS), Abbott Laboratories (ABT), Merck & Company, Inc (MRK), and Eli Lilly and Company (LLY) are four such companies. They are profitable, have handsome  growth prospects and, most importantly, have resilient business models. So, we think it’s wise to buy them now and hold for the long term.

Novartis AG (NVS)

NVS is involved in the research, development, manufacture, and sale of healthcare products worldwide. Innovative Medicines and Sandoz are the two segments through which a company operates.

The FDA recently endorsed Entresto—which already carried an approval for use with patients with chronic heart failure and reduced ejection fraction—for use in heart failure with preserved ejection fraction (HFpEF) for patients whose left ventricular ejection fraction (LVEF) is below normal.

 

During the fourth quarter, ended December 31, 2020, NVS’s revenue grew 1.6% year-over-year to $12.8 billion. Its EPS for the quarter climbed to $0.92 from $0.50 posted in the prior year period. Its Cosentyx sales for the quarter climbed 13%, while its China net sales climbed 16%.

Analysts expect NVS’ revenue for the quarter ending March 31, 2021 to be $13.1 billion, representing  a 6.7% increase year-over-year. Its EPS for the quarter is likely to surge 5.1% to $1.64. NVS ended yesterday’s trading session at $86.50, declining 10.6% over the past year.

NVS’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

NVS also has an A grade  for Stability, and a B for Value and Growth. It is ranked #5  of 238 stocks in the Medical – Pharmaceuticals industry.

In total, we rate NVS on eight different levels. Beyond what we’ve stated above, we have also given NVS grades for Momentum, Quality and Sentiment. Get all the NVS ratings here.

Abbott Laboratories (ABT)

ABT is a global pharmaceutical giant involved in research & development, manufacturing and selling of drugs and other health products. While its Established Pharmaceutical Products segment offers drugs for the treatment of various disorders, its  Diagnostic Products segment markets  laboratory systems.

ABT has received CE mark (CE marking is an administrative marking that indicates conformity with health, safety, and environmental protection standards for products sold within the European Economic Area) for two new uses of its Panbio COVID-19 Ag Rapid Test Device for the detection of the SARS-CoV-2 virus: asymptomatic testing and self-swabbing. According to a recent study published in JAMA, at least 50% of COVID-19 infections are estimated to have begun from exposure to asymptomatic individuals.

ABT’s revenue for the fourth quarter, ended December 31, 2020, climbed 28.7% over the year to $10.7 million, driven by growth in its  Diagnostics segment. The company’s global COVID-19 testing-related sales for the quarter was $2.4 billion, spurred by combined sales of $1.9 billion from Abbott’s BinaxNOW, Panbio and ID NOW rapid testing platforms.

Analysts expect ABT’s revenue for the year ending March 31, 2021 to be $10.7 billion, representing a 39.2% increase year-over-year. Its EPS is likely to grow at the rate of 15.7% per annum over the next five years.

Over the past year, ABT has soared 38.1% to end yesterday’ trading session at $120.80. During the past six months, the stock climbed 18%.

ABT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to Strong Buy in our proprietary rating system. ABT has a grade of A for Growth and Sentiment and a B for Quality and Stability. It is ranked #4 in the Medical – Pharmaceuticals industry.

Click here to see the additional POWR Ratings for ABT (Momentum and Value).

Merck & Company, Inc (MRK)

MRK offers therapeutic care for chronic hepatitis C virus, intra-abdominal, cardiovascular, type 2 diabetes, HIV-1 infection, fungal infection, insomnia, and inflammatory diseases. The company has collaborations with AstraZeneca PLC, Bayer AG, Eisai Co., Ltd., Almac Discovery Ltd, and Skyhawk Therapeutics, Inc.

MRK has secured global licenses for  two CAR-NK programs from Artiva Biotherapeutics. The deal gives the company control of two off-the-shelf solid tumor cell therapies for  $30 million upfront. The company can opt for a third therapy for a further $15 million.  During the fourth quarter ended December 31, 2020, worldwide sales climbed 5% year-over-year to $12.5 billion. MRK’s loss per share narrowed to $0.83 from $0.92 posted in the same period last year. KEYTRUDA’s full-year worldwide sales climbed 30% to $14.4 billion, while BRIDION’s full-year global sales jumped 6% to $1.2 billion.

A consensus revenue estimate for the year ending March 31, 2021 is  $12.7 billion, representing  a 5.7% increase year-over-year. Meanwhile, its EPS is likely to rise 9.3% to $1.64.

MRK has lost 9.5% over the past year to close yesterday’s session at $74.54. Over the past six months, the stock has declined 12.3%.

However, MRK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. MRK also has a grade of B for Value, Stability and Quality. In the Medical – Pharmaceuticals industry, it is ranked #13.

In addition to the POWR Ratings grades I’ve just highlighted, you can see MRK’s ratings for Sentiment, Growth and Momentum here.

Eli Lilly and Company (LLY)

LLY is a world-class pharmaceutical company that offers endocrinology products for treating diabetes and osteoporosis in postmenopausal women and men. It has also developed a cure for human growth hormone deficiency and pediatric growth conditions.

Last month,  LLY completed an acquisition of biotechnology company Prevail Therapeutics for approximately $1.04 billion. Prevail is involved primarily  in developing potentially disease-modifying AAV9-based gene therapies for neurodegenerative disease patients.

During the fourth quarter, ended December 31, 2020, LLY’s revenue climbed 22% year-over-year to $7.4 billion, driven by 24% volume growth. Its EPS for the quarter climbed to $2.32 from $1.64 posted in the same period last year. The company’s chairman and CEO, David A. Ricks, stated “I am also encouraged by exciting recent data readouts for three of our two most important pipeline assets: tirzepatide, LOXO-305 and donanemab.”

A consensus revenue estimate for the year ending March 31, 2021 is  $7.1 billion, representing  a 21.4% decline year-over-year. Meanwhile, its EPS is likely to increase 25.1% to $2.19.

Over the past year, LLY climbed 42.6% to end yesterday’ trading session at $202.50. During the past six months, the stock climbed 35.7%.

The POWR Ratings are also high on LLY. It  has an Overall Rating of A, which translates to a Strong Buy. LLY also has a B  grade for Growth, Sentiment, and Quality. It is ranked #3 out of 238 stocks in the Medical – Pharmaceuticals industry.

Click here to see the additional POWR Ratings for LLY (Stability, Value and Momentum).

The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

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NVS shares were trading at $87.40 per share on Wednesday afternoon, up $0.90 (+1.04%). Year-to-date, NVS has declined -7.44%, versus a 4.56% rise in the benchmark S&P 500 index during the same period.


About the Author: Namrata Sen Chanda


Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More...


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