Some investors are growing concerned over the seemingly endless bull market in stocks, which is being powered by technology companies. They may want to explore health-care shares, whose price-to-earnings valuations have declined over the past two years even as their prices have risen 16% this year, right behind tech stocks’ ascent.
We’ll list analysts’ favorite health-care stocks below. First, here’s how the sectors of the S&P 500 Index SPX, +0.62% have performed over the past 10 years, leaving out the real estate sector, which was carved out of the financial services sector in September:
|S&P 500 sector||Total return – 10 years, through July 11|
Health care has run a very close second to tech in the past 10 years. Over two years, the tech sector has returned 43%, while health care has risen only 9%.
This chart shows the changes in forward price-to-earnings ratios (based on consensus earnings estimates among analysts polled by FactSet for the next 12 months) for the two sectors and the index over the past two years:
The S&P 500 health care sector has gotten cheaper over the past two years, as valuations in the tech sector and the index have risen.
So far this year, the tech sector has returned 19%, while health care has risen 16%. Long-term prospects for both sectors are excellent, with continued innovation for tech and demographic trends, innovation and government subsidies for health insurance all favoring the health-care sector.
But health care has been overlooked by some investors, who understandably focus on tech-related companies with the largest market values among the S&P 500: Apple Inc. AAPL, -0.43% Alphabet Inc. GOOG, +0.80% Microsoft Corp. MSFT, +1.26% Amazon.com Inc. AMZN, +0.65% and Facebook Inc. FB, +1.43%
Here’s a list of the 10 S&P 500 health care stocks with majority “buy” ratings from analysts and the most upside implied by analysts’ price targets:
|Company||Ticker||Share ‘buy’ ratings||Share neutral ratings||Closing price – July 11||Consensus price target||Implied 12-month upside|
|Mallinckrodt PLC||MNK, +2.14%||94%||6%||$43.05||$71.37||66%|
|Mylan N.V.||MYL, +1.41%||68%||32%||$37.65||$48.60||29%|
|Alexion Pharmaceuticals Inc.||ALXN, +0.39%||77%||23%||$124.32||$155.75||25%|
|Envision Healthcare Corp.||EVHC, +0.47%||95%||5%||$61.16||$74.41||22%|
|Biogen Inc.||BIIB, +1.45%||63%||37%||$271.76||$322.33||19%|
|Universal Health Services Inc. Class B||UHS, +0.16%||59%||41%||$122.14||$139.20||14%|
|Allergan PLC||AGN, +1.28%||73%||27%||$242.12||$273.89||13%|
|Incyte Corp.||INCY, +0.96%||76%||24%||$131.92||$146.71||11%|
|HCA Healthcare Inc.||HCA, +0.10%||76%||24%||$86.40||$94.91||10%|
|Boston Scientific Corp.||BSX, +1.16%||74%||26%||$27.53||$30.10||9%|
None of the stocks are rated “sell” by any sell-side analyst polled by FactSet.
You can click the tickers for additional information on each company, including news, valuation ratios, financial statements and filings.