And the conclusion of election season should dampen policy fears surrounding the sector. Regardless, the future looks potentially bright for health care stocks, many of which have been prolifically innovating in recent years as investors’ attention has been focused elsewhere. And the upside to multiple years of sluggish performance is that valuations across the sector have recently looked quite attractive, offering a potential entry point to a sector with profound long-term drivers. Undoubtedly there are opportunities for major returns for investors looking to the health care sector. The companies above led the sector in our screen, but past performance is not a guarantee of future returns.

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We use data-driven methodologies to evaluate financial products and companies, so all are measured equally. You can read more about our editorial guidelines and the investing methodology for the ratings below. Intuitive Surgical (ISRG -1.25%) is a great example of a medical device stock that also falls into the category of surgical stocks. The company’s Da Vinci robotic surgical system has been used in more than 17.6 million procedures since its 1999 introduction. Intuitive Surgical also markets Ion, a robotic system for minimally invasive peripheral lung biopsy.

Aging demographic trends around the world, combined with advances in technology, should open up tremendous opportunities for healthcare stocks — and provide healthy returns for patient investors. Big companies, like insurers and facilities operators, are generally less volatile than small companies like biotech startups, and more likely to pay dividends. However, the higher risk for small companies comes with the possibility of higher rewards in terms of capital gains. But betting too much on an individual stock can be risky — and buying several individual health care stocks can be expensive. Individual stock-pickers also need to research stocks before buying, which can be time consuming. Medical equipment companies produce non-drug health care products.

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Alnylam has been a leader in RNA interference, a type of therapeutic treatment that can “silence” or turn off the production of specific genes that contribute to or cause a disease. The company focuses on treating rare diseases and those with unmet medical needs, such as transthyretin amyloid cardiomyopathy, a potentially fatal heart disease that occurs when faulty proteins build up in the heart. Meanwhile, argenx primarily develops antibody-based therapies for autoimmune diseases, including diseases that cause muscle weaknesses. The health care sector has long been considered a defensive sector, alongside utilities and consumer staples. But honestly, that designation might do health care stocks a disservice. Health care stocks often experience astronomical rallies during these moments.

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• In addition, drugmakers and medical device makers must convince payers, including health insurers, PBMs, and government agencies, to buy their products.
• To screen for the best health care stocks this month, we looked at firms listed on either the Nasdaq or the New York Stock Exchange.
• The Health Care SPDR Select Sector Fund actually outperformed the S&P 500 in the decade after the Affordable Care Act was passed in 2010.
• The sector was outshined by high-growth megatrends like artificial intelligence (AI).
• For example, biopharmaceutical companies, medical device makers, and healthcare providers can be sued if patients think the companies’ products and services have caused them harm.
• From that subset of stocks, we ranked companies according to the highest 30-day percentage return.

Some of these policy headwinds may abate with the upcoming change in administration, while others like drug pricing may persist. Today, we’re going to examine health care stocks, including explaining why you’d want to invest in them and how you can find the best ones to buy. But health care is also a hotbed of innovation and sudden surges in revenue potential, as drugmakers and med-tech companies innovate new treatments and technologies, sometimes addressing brand-new markets. Yes, pharmaceuticals, health care devices and medical coverage are among the last expenditures you’d cut if money were tight, and that fact gives the sector its defensive quality. One of the most common reasons for a company to not have a P/E ratio is if it either took a loss or generated no earnings in the given time period, or in the prior-year period for comparison.

Individual health care stocks

Like many other companies on our list, Danaher’s operations are vast and diverse. The company operates primarily in environmental sciences, diagnostics and life sciences. The life sciences division represents the core of its healthcare operations, through which it produces a wide array of medical devices and instruments. Despite these risks, the overall outlook for healthcare stocks appears very good over the long term.

Some of these, such as Medical Properties Trust, are real estate investment trusts, or REITs, which own hospital buildings and lease them to operators. Merck was nationalized during World War I under the Trading with the Enemy Act of 1917—being an offshoot of a German company. However, the firm was bought back at government auction in 1919 for $3.5 million by George Merck, a member of the Merck family, with help from Goldman Sachs and Lehman Brothers. Merck traces its history back to 1668, making it the oldest company on our list.

Services

Also, life sciences tools and services companies, the segment of the sector that focuses on testing and analysis, saw declining demand as people used fewer COVID tests and continued to work down pandemic-related inventory buildups. Health care companies are enticing to investors because they are highly incentivized to use and create new technology, both to meet rising demand and to improve the affordability of care they can offer. This focus on innovation may mean that health care stocks offer the potential for short- and long-term gains. Many health care stocks offer investors stability and profitability in both good times and bad. But the sector is not without its risks — particularly when the government is involved.

• Health insurers and pharmacy benefit managers are sometimes collectively referred to as “payers,” as their role is to arrange payment for health care services.
• Healthcare spending in the U.S. is seeing strong, sustained growth.
• And while most types of insurance companies belong to financial stocks, health insurers are still classified as health care.
• Undoubtedly there are opportunities for major returns for investors looking to the health care sector.

We believe everyone should be able to make financial decisions with confidence. Pfizer’s top-selling pharmaceuticals are household names, including the antidepressant Zoloft, the erectile-dysfunction drug Viagra and the anti-anxiety drug Xanax. The company has also developed one of the leading Covid-19 vaccines, which it expects will defend against the new omicron variant of the disease. Indiana-based pharmaceutical firm Eli Lilly employs more than 34,000 employees across 18 countries and sells its products in 120 different countries. The company was founded in 1876 by Colonel Eli Lilly, who was a veteran of the Civil War. One of the first products it developed was quinine, a medication used to treat malaria.

To ensure we focused on established companies, we filtered out any companies with a share price below $5, with a minimum daily trading volume of under 100,000, and with a market capitalization below $300 million. From that subset of stocks, we ranked companies according to the highest 30-day percentage return. As defensive stocks, healthcare companies provide steady returns in any market. Because people will always need healthcare, the healthcare sector provides very steady, consistent returns that are uncorrelated with the overall direction of the stock market.

Views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information. For 2025 and beyond, I believe many health care industries may be well positioned. Some investors prefer its defensive qualities – which in many cases includes above-average dividend yields, especially out of established pharmaceutical names.

Interestingly, though, this outperformance comes amid an extremely weak few months for health care, prompted by uncertainty amid expected (and implemented) policy changes by the new presidential administration. Researching an ETF is generally much quicker than researching each individual stock in that ETF — but it’s still important to do. For more information about these industries, check out our guide to biotech stocks. Others, such as health care stocks Tenet Healthcare, are operators that hire and manage doctors, nurses and technicians to provide health care services to patients. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services.