Top Healthcare Stocks to Buy for 2015

By Markets Fool.com

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The healthcare sector was one of the stock market's shining stars in 2014. The S&P healthcare index ETF return more than doubled the return of the S&P 500 in 2014. However, that doesn't guarantee that healthcare stocks will lead again in 2015. In fact, with so many healthcare stocks hitting new highs, it may be getting harder for investors to figure out which healthcare stocks are worth keeping in their portfolios for next year. With that in mind, here are five healthcare stocks that could be worth owning in 2015.

1. Biotechnology stocks get a lot of the press in the healthcare sector, but healthcare insurers have been top-performing stocks thanks to healthcare-reform-driven membership growth. Establishing exchanges that allow the uninsured to get coverage and expanding Medicaid in 27 states are proving to be major sources of revenue growth for insurers, which should continue in 2015. If so, then UnitedHealth Group stands to benefit.

UnitedHealth is the nation's biggest health insurer, but its approach to the exchanges was tepid during the first open enrollment period. However, that's changed this year, with UnitedHealth offering plans on exchanges in 23 states. As a result, membership growth should provide significant tailwinds next year, which has UnitedHealth telling investors to expect it will deliver EPS of between $6 and $6.25 in 2015.

2. Insurers aren't the only beneficiaries of rising insurance enrollment -- hospitals are enjoying profit growth thanks to reform, too. Historically, hospitals set aside billions of dollars every year to pay for care provided to the uninsured. Thanks to rising enrollment in health insurance plans and Medicaid, the industry is slowly, but surely, writing off less of that care. Since exchange enrollment is expected to grow again next year, and Medicaid expansion has been embraced by more states, hospitals like Community Health Systems should be able to drop even more revenue to their bottom line in 2015.

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After acquiring Health Management Associates earlier this year, Community Health has become one of the nation's top hospital operators, and that positions it perfectly to benefit from rising insurance enrollment. It's not just insurance reform, however, that could help Community Health's shares climb next year; aging baby boomers are requiring more procedures, and an improving economy should boost the number of elective surgeries, too. If that proves to be true, then more paying patients should help Community Health deliver on analysts' EPS estimates for $3.97 in 2015, which would be up 23% from 2014.

3. Ditching metal file cabinets for integrated software solutions is a major healthcare trend that should continue to offer support for healthcare IT providers next year, and few are better positioned to capitalize on that trend thanCerner Corp .

Cerner is one of the nation's biggest providers of healthcare software solutions designed to coordinate healthcare across hospitals, specialists, and primary care doctors. In addition to this software being used to create electronic health records, it's also being used to streamline scheduling and payment practices to reduce cancellations and speed up payments. Couple those benefits with healthcare reform's carrot-and-stick approach of bonuses and penalties, and more and more providers are deploying systems made by Cerner.

In the third quarter, Cerner's sales grew 15%, to $840 million, bringing year-to-date sales to $2.47 billion, up from $2.12 billion in 2013. Since third-quarter bookings hit an all-time high for the period, it appears that Cerner's momentum will continue into next year. That could mean it's in good shape to hit analysts' EPS target of $1.96 next year, which would be up 18.7% from 2014.

4. Biotechnology stocks can offer tremendous promise, but they're incredibly volatile, and can make or break a portfolio if investors take on too much risk. That's why I like to focus on biotech stocks with existing products that kick off billions of revenue, compelling pipelines, and rock-solid balance sheets.

Based on those criteria, one of my favorite biotech stocks for 2015 is Celgene Corporation . Celgene already sports three top-selling drugs, including the second-line multiple myeloma drug Revlimid. Revlimid sales jumped 19% year over year last quarter, and the drug is on pace to deliver more than $5 billion in sales next year. Revlimid's sales could end up even higher next year if the FDA approves its use as a first-line multiple myeloma treatment. An FDA decision is expected in February.

Beyond Revlimid, Celgene also markets the cancer drug Abraxane, which had sales of $212 million last quarter, up 25%, and the multiple myeloma drug Pomalyst, which is used as a third-line treatment, and had sales of $181 million last quarter. Additionally, the company is conducting more than a dozen late-stage studies to either expand the labels of existing drugs or add new products to its portfolio, and it has an enviable balance sheet, as well.

The company's cash stockpile grew to $3.7 billion in the third quarter from $3.2 billion in December, and its current ratio, which offers insight into a company's ability to meet short-term financial obligations, is strong at 6.3. Combine those compelling reasons to own the stock with the fact that analysts predict EPS will grow 32% next year to $4.86 per share, and you could have a recipe for another solid year.

5.In addition to those four companies, investors may also want to consider owning the dentistry medical device company Align Technology in 2015.

Align isn't a household name, but the company's well-known Invisalign clear aligner products continue to enjoy demand growth as consumers turn to less visible corrective dentistry products. In the third quarter, sales of Align's clear aligners grew 16% year over year, to $178.1 million, and sales for the company's CAD/CAM scanners and services business grew by 7.1% in the third quarter.

Overall, Align's revenue through the first nine months totals $563 million, up from $482 million last year -- but sales growth isn't the only reason to consider owning this stock. Align is also highly profitable, and it's debt free. Align's net profit during the first nine months totaled $106 million, or $1.29 per diluted share, up from $22 million, or $0.26 in 2013, and analysts think EPS will reach $2.11 in 2015, up 18.5% from 2014.

Mixing and matching
Healthcare is a major part of our economy, and investors are right to want to have exposure to the sector, particularly as overall spending on healthcare grows. However, that doesn't mean that investors should put all their eggs in one basket. Instead, investors should spread the healthcare portion of their investments around the various healthcare industries. Because these healthcare stocks provide investors with exposure to different areas of healthcare, and each offers investors sales growth and a sleep-friendly balance sheet, these five companies may make sense for portfolios in 2015.

The article Top Healthcare Stocks to Buy for 2015 originally appeared on Fool.com.

Todd Campbellis long Celgene. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. Todd owns Gundalow Advisors, LLC. Gundalow's clients do not have positions in the companies mentioned.The Motley Fool recommends Align Technology, Celgene, and UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.