In this article, we discuss the 12 healthcare stock options to add to your retirement portfolio. If you wish to see more such stocks within our list, you can go directly to read the Retirement Stock Portfolio: 5 Healthcare Stocks To Consider.
Globally, retirees are exploring investment opportunities to supplement their income, driven by the highest inflation recorded in nearly four decades. In response to this concern, the Social Security Administration addressed the issue by announcing an 8.7% increase in benefits earlier in 2023 to mitigate the impact of inflation, as reported by Bloomberg. With this adjustment, the average retiree benefit reached $1,827 per month, marking a $146 increase from the year 2022. However, given the average annual household expenses for individuals aged 65-74 amounting to approximately $53,000, these social security benefits fall short of adequately covering living costs.
In times of economic challenges, investors, particularly those looking forward to a secure retirement, tend to lean towards low-risk stocks that offer reasonable returns amid heightened uncertainties. Consequently, healthcare and consumer stocks often become the preferred choices when navigating significant macroeconomic headwinds. The healthcare industry has undergone profound changes, particularly in the aftermath of the pandemic. Advances in medical technology, pharmaceuticals, and treatment methodologies have brought about a revolution in patient care and outcomes.
The healthcare sector includes a broad spectrum of companies, covering pharmaceuticals, manufacturers of medical equipment and devices, providers of medical insurance, and various other healthcare services. Due to the diverse range of services offered, which frequently contribute to higher life expectancy and enhanced quality of life, the healthcare sector plays a substantial role in the global economic landscape. According to a recent report by Bloomberg, government data highlights that health spending in the US is anticipated to reach nearly $7.2 trillion by 2031. This spending is projected to grow at a faster rate than the overall economy in the coming years. Healthcare expenses are expected to constitute 19.6% of the country's total economic output (GDP), up from 18.3% in 2021. In addition, the industry is expected to witness a 12.8% increase in earnings in 2024, slightly surpassing the 11.8% growth anticipated for the S&P 500. This growth is fueled, in part, by an elevated demand for products such as obesity drugs.
Pharmaceutical companies, an extension of the overall healthcare industry, are commonly categorized as defensive, given their role in producing essential health maintenance and illness treatment products. The demand for these products tends to remain relatively stable, even during economic downturns. Notably, the sector provided favorable returns to investors in 2022, marked by the S&P 500's weakest annual performance since 2008. From December 2021 to December 2022, the NYSE Arca Pharmaceutical Index recorded a gain of 4.91%, contrasting sharply with the S&P 500's significant 19.4% decline. Over the past 5 years, the index has shown an increase of 67.48%. With that in mind, some of the best healthcare stocks to buy for a retirement stock portfolio include the likes of Pfizer Inc. (NYSE:PFE), Eli Lilly and Company (NYSE:LLY), and Johnson & Johnson (NYSE:JNJ), among others listed below.
Retirement Stock Portfolio: 12 Healthcare Stocks To Consider
A healthcare professional in full protective gear performing a medical procedure.
Our Methodology
For our list of the 12 best healthcare stocks to consider for a retirement stock portfolio, we used a stock screener to come up with a list of stocks with a beta value of less than 1. We further narrowed down this list to include healthcare stocks that have a notable history of paying dividends to investors. Their dividend growth histories make them suitable options for retiree investors who seek to generate stable income. In addition to this, the hedge fund sentiment was measured using data from 910 hedge funds tracked by Insider Monkey in Q3 2023. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
Headquartered in the United States, McKesson Corporation (NYSE:MCK) specializes in pharmaceutical distribution and offers health information technology, medical supplies, and care management solutions. Notably, the company supplies one-third of all pharmaceuticals used in North America and maintains a workforce exceeding 78,000 employees. As of January 8, the company pays a quarterly dividend of $0.63 per share, resulting in a dividend yield of 0.52%.
In Q3 2023, the number of hedge funds tracked by Insider Monkey owning stakes in McKesson Corporation (NYSE:MCK) stood at 58, a slight decline from the previous quarter. The consolidated value of these stakes is over $2.95 billion.
Baron Health Care Fund made the following comment about McKesson Corporation (NYSE:MCK) in its Q3 2023 investor letter:
“Partially offsetting the above was favorable stock selection in pharmaceuticals and health care distributors along with cash exposure in a declining market. Strength in pharmaceuticals and health care distributors was driven by gains from Lilly and McKesson Corporation (NYSE:MCK). McKesson’s stock performed well due to strong financial results in the company’s pharmaceutical distribution and prescription technology solutions businesses, driven in part by higher volumes of GLP-1 medicines and prior authorization technology services related to GLP-1 medicines.”
Much like Pfizer Inc. (NYSE:PFE), Eli Lilly and Company (NYSE:LLY), and Johnson & Johnson (NYSE:JNJ), McKesson Corporation (NYSE:MCK) ranks among top-rated healthcare stocks that are suitable for a retirement stock portfolio.
Amgen Inc. (NASDAQ:AMGN) is a global biopharmaceutical company engaged in the research, development, manufacturing, and distribution of human therapeutics. Recognized as one of the notable healthcare stocks for a retirement stock portfolio, the company focuses on key areas such as oncology/hematology, inflammation, bone health, cardiovascular diseases, nephrology, and neuroscience. As of January 8, Amgen Inc. (NASDAQ:AMGN) offers a quarterly dividend of $2.25 per share, resulting in a dividend yield of 2.92%, making it a decent candidate for a retirement stock portfolio.
In Q3 2023, the number of hedge funds tracked by Insider Monkey reporting stakes in Amgen Inc. (NASDAQ:AMGN) stood at 60, marking an increase from the previous quarter’s 57. The consolidated value of these stakes is over $2.16 billion.
Aristotle Capital Value Equity Strategy made the following comment about Amgen Inc. (NASDAQ:AMGN) in its Q3 2023 investor letter:
“Amgen Inc. (NASDAQ:AMGN), the biopharmaceutical company, was the top contributor for the quarter. The company continues to leverage its innovative platform to strengthen its product portfolio, offset maturing products, such as Epogen and Neulasta, and increase market share. Over the past year, Amgen has reported double‐digit volume growth, operating margin expansion to over 40% and record levels of sales for cholesterol drug Repatha, bone‐strengthening drug Prolia and cancer drug Blincyto. Additionally, the company remains well positioned to benefit from the continued development and commercialization of biosimilars such as Amgevita, the first biosimilar to Humira, and the successful integration of Otezla to bolster its inflammation segment. Lastly, the FTC agreed to allow Amgen to proceed with its $27.8 billion acquisition of Horizon Therapeutics. We note that this is yet another unsuccessful attempt by the FTC to block an M&A transaction of one of our holdings (see below re: Activision Blizzard). The transaction closed on October 6, 2023 and brings expertise in rare disease therapies (including bulging eye‐drug Tepezza), as well as adds to Amgen’s immunology portfolio.”
CVS Health Corporation (NYSE:CVS) stands as a prominent healthcare entity overseeing an extensive network of retail pharmacies and clinics across the nation. The organization operates under various brands, including CVS Pharmacy (a retail pharmacy chain), CVS Caremark (a pharmacy benefits manager), and Aetna (a health insurance provider).
During the third quarter, CVS Corporation (NYSE:CVS) achieved sales of $89.76 billion, reflecting an almost 11% increase from the corresponding period in the previous year. The company also reported a net income of $2.27 billion, or $1.75 per share, for the quarter. This marked a significant turnaround from the net loss of $3.40 billion, or $2.59 per share, reported for the same period a year ago.
As of the conclusion of the third quarter in 2023, data from Insider Monkey’s database, which monitors 910 hedge funds, indicated that 64 hedge funds had positions in CVS Health Corporation (NYSE:CVS). Notably, Two Sigma Advisors, led by John Overdeck and David Siegel, emerged as a significant investor with a substantial stake in the company valued at $344.87 million.
ClearBridge Sustainability Leaders Strategy made the following comment about CVS Health Corporation (NYSE:CVS) in its Q3 2023 investor letter:
“Other health care holdings such as managed care company UnitedHealth Group and health care services company CVS Health Corporation (NYSE:CVS) were also rewarded in the third quarter. CVS, though a marginal contributor, has been weighed down in 2023 by an acquisition deal for Oak Street Health, an increase in medical benefits costs and a decline in the company’s overall Medicare Advantage star rating, but recent operational improvements suggest progress in its transition from a retailer to a diversified health care services company. Oak Street Health is a potential foundational asset for CVS’s retail primary care strategy, and we are positive on the company’s long-term prospects.”
Bristol-Myers Squibb Company (NYSE:BMY) operates as a global biopharmaceutical firm, engaging in various facets of the biopharmaceutical industry, which includes research, development, licensing, manufacturing, marketing, and distribution of biopharmaceutical products. These products are designed to address a broad spectrum of medical conditions, covering hematology, oncology, cardiovascular, immunology, fibrotic, and neuroscience diseases.
On December 27, Geoff Meacham at Bank of America Securities maintained a Buy rating and a $68 price target on shares of Bristol-Myers Squibb Company (NYSE:BMY).
As of the conclusion of the third quarter this year, Bristol-Myers Squibb Company (NYSE:BMY) attracted investments from 65 out of the 910 hedge funds examined in Insider Monkey’s research.
RGA Investment Advisors made the following comment about Bristol-Myers Squibb Company (NYSE:BMY) in its Q3 2022 investor letter:
“Bristol-Myers Squibb Company (NYSE:BMY), which we referenced above, boasts a double digit free cash flow yield that gets divided roughly equally between repurchases, a dividend and M&A in what is the best environment for acquisitions perhaps ever. In 2019, BMY acquired Celgene, who had one of the better corporate development programs in the industry. We view this as a great outlet for us as generalists considering a company like BMY should truly thrive with the ability to acquire outstanding assets and science at depressed valuations. We touched on the Turning Point acquisition above and we expect the company to be increasingly active in the M&A landscape. Importantly, Celgene also came to BMY with a phenomenal CAR-T platform. CAR-T is a cell therapy that activates the body’s immune system to target cancers. This will be a key growth vector alongside M&A in overcoming the company’s patent cliff.”
Headquartered in Abbott Park, Illinois, United States, Abbott Laboratories (NYSE:ABT) is a multinational medical devices and healthcare company with a diverse product portfolio that includes Pedialyte, Similac, BinaxNOW, Ensure, Glucerna, ZonePerfect, FreeStyle Libre, i-STAT, and MitraClip.
In the third quarter, Abbott Laboratories (NYSE:ABT) reported a 2.5% year-over-year (YoY) decline in revenues, totaling $10.14 billion, surpassing estimates by $320 million. Despite this decline, the company exceeded the anticipated earnings per share (EPS) of $1.10, posting a non-GAAP EPS of $1.14.
As of Q3 2023, 69 out of the 910 hedge funds tracked by Insider Monkey owned shares of Abbott Laboratories (NYSE:ABT). Among the leading hedge fund shareholders was Ric Dillon’s Diamond Hill Capital with ownership of 5.06 million shares valued at $490.45 million.
AbbVie Inc. (NYSE:ABBV) operates as a specialized biopharmaceutical company dedicated to the research, development, manufacturing, and distribution of medications designed for chronic and complex illnesses. The company is particularly known for its flagship drug, Humira, which is a crucial treatment for conditions such as moderate-to-severe rheumatoid arthritis and Crohn’s disease.
With an impressive 50-year streak of continuous dividend growth, the American pharmaceutical giant currently boasts a dividend yield of 3.84% as of January 8.
As of the close of the third quarter in 2023, Insider Monkey’s database, monitoring 910 hedge funds, indicated 73 holdings in AbbVie Inc. (NYSE:ABBV), marking a slight decrease from the 74 hedge funds in the previous quarter. The collective value of these holdings surpasses $3.27 billion.
AbbVie Inc. (NYSE:ABBV) joins the ranks of Pfizer Inc. (NYSE:PFE), Eli Lilly and Company (NYSE:LLY), and Johnson & Johnson (NYSE:JNJ) as one of the best healthcare stocks for a retirement stock portfolio.
Established in 1849 by German entrepreneurs Charles Pfizer and Charles F. Erhart, Pfizer Inc. (NYSE:PFE) stands as a renowned multinational pharmaceutical and biotechnology corporation headquartered at The Spiral in Manhattan, New York City. Globally recognized for its substantial contributions to medical research, development, and production, Pfizer operates across various medical fields, including immunology, oncology, cardiology, endocrinology, and neurology. In 2022, Pfizer Inc. (NYSE:PFE) achieved remarkable success with its COVID-19 vaccine Comirnaty, generating an impressive $37.8 billion in alliance revenues and direct sales.
As of the conclusion of Q3 2023, data from Insider Monkey’s database revealed that 73 hedge funds maintained stakes in Pfizer Inc. (NYSE:PFE), a figure unchanged from the previous quarter. The combined value of these stakes exceeds $2.4 billion.