With COVID still at large and the recently discovered Omicron variant, the stock market is already taking a hit as a consequence. If one wants to invest in stocks, healthcare is the field that they would want to invest in, as Healthcare stocks are bound to grow during this tough time.
Table of Contents:
- Types of Healthcare Stocks
- Healthcare Stocks That You Might Want to Keep an Eye Out For in 2022
- Things You Should Look Out For Whilst Investing in a Healthcare Stock
Types of Healthcare Stocks
The types of companies that offer healthcare stocks can mainly be divided into four categories:
- Drug Manufacturing: These stocks belong to the companies that manufacture drugs. These drugs can range from your basic Paracetamol to Corticosteroids like Hydrocortisone and Dexamethasone.
- Medical Equipment Manufacturing: These stocks belong to companies that manufacture medical equipment. This equipment can range from your basic surgical mask and gloves to heart-rate monitors, X-ray machines, MRI scanners, Defibrillators, Ventilators, ECG and EKG machines, Boyle’s Apparatus (also known as the machine for Anesthesia), etc.
- Health Insurance Stocks: These are the companies that provide health insurance to individuals. Almost all individuals might have health insurance done by a company. A few companies providing health insurance in India are Bajaj Allianz, Aditya Birla, Kotak Mahindra, Bharti AXA, etc.
- Dividend Stocks: These stocks belong to publicly traded firms that pay dividends to their shareholders on a timely basis. The pay-out period is different for each company, though most companies pay out their dividends yearly. These businesses are often well-established and have a track record of fairly distributing profits to shareholders.
Healthcare Stocks That You Might Want to Keep an Eye Out For in 2022
- Pfizer: Pfizer Incorporation based in New York City, is an American multinational biotechnology and pharmaceutical corporation. Founded by two German immigrants, Charles Pfizer and his relative Charles F. Erhart in the year 1849. Pfizer is one of the leading companies in the field of healthcare and has generated revenues evaluating to more than a billion US dollars annually. The profit (not revenue) made by the company Pfizer Ltd.(India based) in the year 2020 and 2021 is ₹509 crore and ₹498 crore, respectively. Pfizer is one of the leading healthcare companies and has even contributed to developing the vaccine for COVID-19 in the United States of America. If you want stable growth, Pfizer is the way to go.
- Vertex Pharmaceuticals: Founded in 1989 by J.Boger and K.J. Kinsella, Vertex Pharmaceuticals Inc. is a biotechnological and bio-therapeutic company based in Boston, MA, USA. Vertex mainly targets to treat genetic disorders like muscular dystrophy, cystic fibrosis, etc. The company made staggering revenue of 4.8 billion US dollars inside the United States and 1.4 billion US dollars across the rest of the world. It is one of the strongest stocks available in the stock market. The stock of Vertex is bound to grow as they keep developing new medication using cutting-edge biotechnology, which has to grow with time.
- Dr. Reddy’s Laboratories: Founded in 1984 by Kallam Anji Reddy, Dr. Reddy’s Laboratories is an Indian MNC. It has a wide range of products apart from pharmaceuticals such as generic drugs, vaccines, over-the-counter medication, and other products like contact lenses, etc. The revenue by the company in the year 2020 and 2021 worldwide is ₹17,217 crore and ₹19,048 crore, which is roughly estimated to be 2-3 billion US dollars per year. The price of a stock of Dr. Reddy’s Laboratories Ltd. has nearly doubled itself in the last 5 years and is sure to increase more making it a stock that is bound to show a substantial amount of growth in 2022.
- Apollo Hospitals Enterprise: It is no doubt that the word ‘Apollo’ comes to every Indian’s mouth when they talk about hospitals. Founded by Prathap C. Reddy in 1983, Apollo Hospitals Enterprise was the first corporate healthcare provider in India. The revenue generated by the company in the years 2020 and 2021 is ₹11,247 crore and ₹10,560 crore, respectively. This stock stands at a BlueChip level and its price has quintupled over the last 5 years and will definitely grow in 2022.
Things That You Should Look Out For Whilst Investing in a Healthcare Stock
There are a lot of factors with which you can predict the trend in a stock. A few of them are listed below:
- Growth of the stock: The growth of a particular stock can be determined by the P/E ratio (Price to Earnings ratio) and other factors like cash flow/share. Though it is nearly impossible to predict the upward trend of a stock, if a company has a high P/E ratio then it will probably not have a bullish trend in the future.
- Valuation: The valuation of a company can be determined by checking the earnings per share (EPS) and using various models like DDM (Discounted Dividend Model) or DCF (Discounted Cash Flow). You can Google Search about these models to calculate the valuation of the stock that you are planning to invest in. Calculating the valuation of a company will show you if the stock is overvalued or not. You would want to abstain from investing in a company that has an overvalued stock price.
- Dividends: If a stock pays you a really high dividend then it probably is not the best stock to invest in. The more a company pays out to its shareholders as a dividend, the less money it has to re-invest into the company. This might suppress the long-term growth of stock, so be sure to do your research about the yield and payout ratio of the company you’re inclined to invest in.
Healthcare stocks, in general, will show an upward trend in the long term as health and medicine is a basic necessity to all living beings out there. Health insurance remains quite important too. Health is an undying field. With inflation and new methods of treatment being discovered almost on a daily basis, thanks to the development of technology, investing in healthcare stocks is a sound plan in the long term. Though it is next to impossible to exactly predict the future prices of a share, it is somewhat possible to predict the trend (upward or downward) of certain shares. With extensive research, one can build a good portfolio with healthcare stocks.