The healthcare industry has proven exceptionally resilient to the ebb and flow of market sentiment over the years. While stock performance is different for each company and has its own unique growth story, there’s a reason why these companies generally stay the course even when overall macro conditions suffer.
In general, healthcare companies provide products and solutions that people need, regardless of what’s happening in the stock market or in the economy as a whole. That fact could make this space an intriguing place to park cash as you diversify your portfolio and continue your investing journey.
If you’re looking for top healthcare stocks to buy now, here are two names to consider for your buying basket.
1. Vertex Pharmaceuticals
Vertex Pharmaceutica (NASDAQ: VRTX) has long been known for its cystic fibrosis drug franchise. That business has catapulted the company to consistent revenue growth and profitability.
Because Vertex makes the only drugs approved to treat the underlying cause of cystic fibrosis, the company has been able to control the lion’s share of this segment of the rare disease drug market. The best-selling drug Trikafta covers about 90% of the patient population in the US alone.
Still, management believes there is a significant market opportunity for its cystic fibrosis franchise. The drugs help patients live better and longer, which in turn extends the life cycle for using the drugs. The company is also working on a new triple combination therapy for cystic fibrosis, as well as an mRNA-based drug with Modern for patients with cystic fibrosis who cannot use the existing range of medications.
Vertex already has its sights set on many other areas of the rare disease drug market. It is in the midst of the early launch phase of Casgevy, a potential one-time functional cure for sickle cell disease and transfusion-dependent beta-thalassemia.
The company developed this gene editing therapy with CRISPR therapies. Management has estimated that the total market opportunity for this product could reach well over 35,000 people in the US and Europe alone.
The U.S. Food and Drug Administration (FDA) just approved Vertex’s rolling new drug application for suzetrigine, its non-opioid drug candidate for acute pain. Management estimates the total addressable market for this drug at approximately 80 million people.
The company also just announced the planned acquisition of Alpine Immunosciences, a biotech company focused on the development of immunotherapies. Vertex is rapidly expanding its footprint in several untapped sectors of the rare disease drug industry. For example, as part of its promising pipeline, the company is also developing drugs to treat the root causes of undertreated diseases such as APOL1-mediated kidney disease and autosomal dominant polycystic kidney disease (ADPKD).
Now seems like a good time to consider this healthcare stock, as its growth trajectory could send the stock even higher.
2. Johnson & Johnson
Johnson & Johnson (NYSE: JNJ) is one of the well-known names in the pharmaceutical industry. With a company that has been going strong for some 118 years, and a dividend history that includes 62 consecutive years of payout increases, this is one of those companies that can be a reliable addition to a long-term investor’s portfolio.
The company just increased its quarterly dividend by 4.2%. It boasts a current yield of approximately 3.3% at the time of writing. And to give you an idea of how legendary Johnson & Johnson’s commitment to its dividend is, this is a stock that has increased its dividend by 80% in the last ten years alone.
Although Johnson & Johnson is the S&P500With its total returns over the past decade, it has delivered solid performance for long-term investors. Over the past ten years, the stock has delivered a total return of over 90%. Granted, J&J continues to deal with legal issues related to its talc products, but its strong balance sheet is more than capable of protecting the company.
When the company spun off its consumer health division into a separate entity, KenvueLast year, this not only provided a cash windfall, but it also lost a business that had somewhat dampened overall growth. With its pharmaceutical businesses (known in financial reports as the Innovative Drugs segment) and medical technology businesses remaining in focus, the company is focused on the next era of growth.
Last quarter, Johnson & Johnson posted net sales of $21 billion, up 2% year over year, and profits of $5.4 billion. The company ended the quarter with a whopping $21 billion in cash and investments on the balance sheet, and generated free cash flow of $3 billion in the three-month period.
It also just announced its newest addition, this time Shockwave Medical. The $13 billion all-cash purchase will expand Johnson & Johnson’s presence in cardiovascular interventions. This is a space where the company already has a growing footprint thanks to its previous acquisition of Abiomed (known for the world’s smallest heart pump).
With a company at this stage in its growth story, you’re not looking for lightning short-term returns or even above-average quarterly growth. You’re looking for a wide moat, an impressive portfolio of approved products, a solid pipeline, and a track record of successfully bringing candidates to market.
You also want a company that delivers sustainable profitability and has a path to future growth. Johnson & Johnson certainly meets these benchmarks. It seems like a good time to grow or start a position in this top healthcare stock.
Should you invest $1,000 in Vertex Pharmaceuticals now?
Consider the following before purchasing shares in Vertex Pharmaceuticals:
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Rachel Warren holds positions at Johnson & Johnson. The Motley Fool holds positions in and recommends CRISPR Therapeutics, Kenvue, Shockwave Medical, and Vertex Pharmaceuticals. The Motley Fool recommends Johnson & Johnson and Moderna and recommends the following options: Long January 2026 $13 calls on Kenvue. The Motley Fool has a disclosure policy.
2 Top Growth Stocks to Buy Now and Hold Forever was originally published by The Motley Fool
