Markets

Top 3 Healthcare Stocks for Maximum Profit Potential

By Hazle Jakubowski

June 23, 2024

141

McKesson Corporation (NYSE:MCK), one of the leading pharmaceutical distributors, has been forming strategic partnerships to expand services in the healthcare sector. This is a sector that offers stability and growth potential even during economic downturns due to an aging global population, rising healthcare expenditures, and advancements in medical technology.

Notably, the Health Care Select Sector SPDR Fund (NYSEARCA:XLV), the largest healthcare exchange-traded fund ("ETF"), has gained 7% year-to-date ("YTD"). This return demonstrates a clear appetite for exposure to U.S. healthcare stocks that exhibit robust fundamentals, innovative approaches, and a clear vision for future success.

Among these "healthy" stocks is Elevance Health (NYSE:ELV). The company focuses on preventative care, disease management, and integrated wellness programs. It reported strong financial results for Q1 2024, with operating revenue growing by 0.9% year-over-year ("YOY") to $42.3 billion while adjusted diluted earnings per share ("EPS") grew by 12.5%. Strategic moves, such as acquiring Paragon Healthcare and partnering with Clayton Dubilier & Rice, aim to improve health outcomes through value-based care and a holistic approach.

Another significant player in this field is HCA Healthcare (NYSE:HCA), which runs a vast network of hospitals across America—ggeneral acute-care hospitals, psychiatric hospitals, among others—tthereby making it an attractive investment opportunity within this dynamic sector.

HCA's latest financials demonstrated broad-based volume growth, with revenues reaching $17.34 billion, up from the previous quarter’s returns by about 11%. A collaborative study led by HCA and funded by the CDC involving multiple hospitals achieved breakthroughs in outbreak detection and antibiotic targeting, thus enhancing patient safety.

Finally, yet importantly, McKesson Corporation rounds out our discussion of healthy stocks within this industry. As one of the major players in the North American pharmaceutical distribution landscape, McKesson operates through four primary segments: U.S. Pharmaceutical, International, Medical-Surgical Solutions, and Prescription Technology Solutions (RxTS).

In May, McKesson reported fourth-quarter fiscal 2024 earnings, with total revenues rising by 11% to $76.4 billion on the back of strong U.S. pharmaceutical sales driven by increased prescription volumes.

Furthermore, Wall Street is pointing out that McKesson has been proactive in forming strategic partnerships and expanding its service offerings, such as by extending its pharmaceutical distribution partnership with UnitedHealth Group's Optum segment through a five-year contract starting in July 2024.

Additionally, McKesson's Sarah Cannon Research Institute joint venture collaborated with AstraZeneca to enhance oncology clinical trials within the U.S. Oncology Network.

Year-to-date ("YTD") MCK stock has soared by about 30%, trading at an all-time high, yet its valuation still appears appealing at approximately 19x forward earnings, making it an attractive investment opportunity for interested parties who may want to consider buying into these shares once the price dips below the $600 level.

In conclusion, the healthcare sector remains a solid investment avenue due to constant demand for innovation and care driven by the aging global population, among other factors. Players like Elevance Health, HCA Healthcare, and especially McKesson Corporation stand out due to their robust fundamentals, innovative approaches, clear vision for future success, and strategic partnerships towards expanding services.


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