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
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:
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.
and Facebook Inc.
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|
|Alexion Pharmaceuticals Inc.||77%||23%||$124.32||$155.75||25%|
|Envision Healthcare Corp.||95%||5%||$61.16||$74.41||22%|
|Universal Health Services Inc. Class B||59%||41%||$122.14||$139.20||14%|
|HCA Healthcare Inc.||76%||24%||$86.40||$94.91||10%|
|Boston Scientific Corp.||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.
Scared of tech stocks? Health-care shares are cheaper — and rallying