Image source: Unsplash via Pixabay.
Continue Reading Below
The gradual aging of the global population makes it a near-certainty that worldwide spending on healthcare will grow for decades to come, so it makes sense for every investor to consider devoting a portion of his or her portfolio to the sector. However, with an increase in politicalattention on the space, many investors might be hesitant toinvest since they don't want to have to constantly monitor the headlines for thesis-changing developments.
Knowing that, we reached out to a team of our Motley Fool healthcare contributors and asked them to highlight a healthcare stock they think doesn't require babysitting. Read below to see what they said.
Brian Feroldi:Johnson & Johnson is likely to be the ultimatehealthcare stock that doesn't require constant attention since it's so big and so well diversified that its future isn't overly dependent on any one part of the healthcare space.
J&J breaks out its business into three main divisions: consumer products, medical devices, and pharmaceuticals. Each division pulls in billions in revenue each year, and the company believes it's either the No. 1 or No. 2 player in 17 different categories that comprise about 70% of J&J's total sales. That dominant market position helps to ensure the company's overall financial picture stays healthy -- even if any one individual product or region catches the flu.
Image source: Johnson & Johnson.
The company has also done a great job at diversifying its revenue from around the globe: Roughly half of its revenue is derived from outside the U.S. While that can put a damper on the company's reported results when the dollar is strong -- as it is right now -- over the long term, its exposure to faster-growing markets should help to drive revenue and profits.
Johnson & Johnson also has a long history of taking care of shareholders -- it has raised its dividend payment for53 years in a row, anachievement very few companies can claim. The company most recently bumped its payout by 7%, giving the stock a dividend yield of 2.8% right now.
Despite the fact that Johnson & Johnson is trading near its all-time high, I have a hard time calling its stock expensive. Shares are currently trading for a little less than 17 times its full-year profit estimates, which I think is a fair price for a dependable company like J&J. All told, I think Johnson & Johnson is a great option for investors who are looking for low-maintenance healthcare exposure.
Cheryl Swanson: Global healthcare companyRoche Holdings is a stock you can buy right now and don't have to babysit. Roche sports a dream pipeline in 2016, withthree major blockbustersheaded for make-or-break FDA decisions. The company also has a stable business model, an attractive dividend yield, and it's trading at a trailing P/E of around 25. That's a hefty discount from its peers, which largely trade around 30.
While the main pillar supporting the company is pharmaceuticals, it also has a cutting-edge diagnostics unit focused on personalized medicine, adding some all-important earnings diversification. And what about that dividend? Currently yielding 3.4%, Roche's dividend payout has increased for almost 30 years. The 10-year dividend growth rate is impressive as well -- slightly over 14%. Currency headwinds could continue to pressure dividend increases to more modest levels for a while, but they aren't hurting the payout ratio, which still sits at a comfortable 60%.
Image source: J&J.
A few days ago, Roche signed a deal withKite Pharmathat will bring together two of the hottest tickets in oncology research: CAR-T and PD-L1. Roche's own powerful PD-L1 drug (atezo) has a solid chance of rolling out this year, and the deal will give Roche a little more exposure in the equally hot CAR-T space, but with a lowered financial risk if things don't work out.
Roche often is ignored by American investors because the dividend is only paid annually, which slows the compounding effect when you reinvest your dividends. In addition, you have to deal with the foreign withholding tax Switzerland imposes. But if that doesn't stop you, this world-class company is well worth a closer look.
Sean Williams: Not having to wait on the edge of your seat during each trading day to see if the stocks you own will survive to see another day is a great thing. One such healthcare stock that you can consider adding to your portfolio and pay little worry toward is animal health giant Zoetis .
There are three main factors I suspect could push Zoetis' share price higher over the long term.
First, the companion pet market is growing by leaps and bounds. More than nine in 10 respondents to a 2012 Harris poll proclaimed their pets to be a part of their family. As such, they'd be willing to do whatever is necessary to ensure they're well taken care of, which can include going to the vet and getting certain medicines developed by Zoetis. Further, we've also seen pet industry expenditures jump from $17 billion in 1994 to an estimated $60.6 billion in 2015 per the American Pet Products Association. This trend bodes well for Zoetis.
Secondly, a growing global population more than likely will lead to a higher need for meat via cattle. A good portion of Zoetis' business comes from its livestock segment, which is looked upon to help ranchers ensure that their livestock remains healthy. This is one of those instances where we won't see growth overnight, but we're clearly looking at a long-tail growth opportunity in livestock.
Lastly, drug developers have unparalleled pricing power, often because there's minimal competition for certain therapeutics. This is especially true for animal health, where generic formulations simply may not exist. This should allow Zoetis to reap high-margin rewards for a long period of time.
The article 3 Healthcare Stocks You Don't Have to Babysit originally appeared on Fool.com.
Brian Feroldi has no position in any stocks mentioned. Cheryl Swanson owns shares of Johnson & Johnson. Sean Williams has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Johnson & Johnson. 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.
Copyright 1995 - 2016 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.