Demographics, demographics, demographics. That’s always a key factor when it comes to investing, and that’s especially true when it comes to investing in healthcare stocks. An aging global population, combined with a growing middle-class market and advances in medical technology makes this sector a sound long-term investment.

Stocks to buy when investing in healthcare.

Investing in Healthcare Pros

The healthcare sector offers a wide range of investment choices. These include companies focusing on:

  • Biotechnology
  • Health insurers
  • Healthcare technology
  • Hospitals
  • Life science tools
  • Medical equipment and services
  • Pharmaceuticals

As defensive stocks, this sector usually provides stable earnings not correlating to the stock market’s overall performance. Keep in mind that various industries in this sector react to market conditions based on how the particular industry is affected. For instance, COVID-19 boosted the stocks of companies developing testing and vaccines. The cancellation of elective surgeries during that period put a dent in the stock of many medical device manufacturers and for-profit hospitals.

Investing in Healthcare Cons

What’s the downside to investing in healthcare stocks? Overall, these stocks are subject to U.S. policy changes. Healthcare stocks are vulnerable to regulatory risks. When it comes to pharmaceutical stocks, an FDA recall or poor clinical trial results can affect share price severely.

There’s also the fact that the pandemic is still with us. While healthcare stocks have mostly recovered from the battering this novel event imposed, challenges still exist.

Top Healthcare Stocks

Stocks to consider when investing in healthcare include:

No. 4 Johnson & Johnson (NYSE: JNJ)

New Brunswick, New Jersey-based Johnson & Johnson calls itself “the world’s largest and most broadly-based healthcare company.” Founded in 1886, J&J products in its consumer health division include household names such as Band-Aid®, Benadryl, Motrin, Tylenol, and Zyrtec. That’s literally just naming a few. Its many subsidiaries include Janssen Pharmaceuticals, Ethicon, DePuy Synthes, McNeil Products Ltd. and Ortho-McNeil Pharmaceuticals.

For the first quarter of 2022, J&J pays a dividend of $1.06 per share. J&J is a dividend aristocrat, raising its dividends for 59 years in a row. The company experienced total sales growth of 5%, to 23.4 billion. Operational growth was 7.7% with an adjusted operational growth of 7.9%. Earnings per share of $1.93 decreased 16.8% and adjusted earnings per share of $2.67 increased 3.1%.

J&J’s consumer health sales increased 1.6% during this period. Pharmaceutical sales grew 9.3% and its MedTech sales grew 8.6%. J&J is a great stock to consider when investing in healthcare.

J&J’s coronavirus vaccine has been associated with a rare but serious blood clotting disorder. On May 6, the FDA imposed new restrictions on who may receive this vaccine. Five months earlier, the CDC decided to give preferential recommendations to the Moderna and Pfizer vaccines. The company announced it will not use the vaccine in its revenue projections.

No. 3 Teladoc Health (NYSE: TEDOC)

During the pandemic, telehealth services boomed. So did Teladoc, one of the oldest telemedicine companies in the business. Founded in 2002 in Dallas, Texas, it is the global leader in virtual care. Its brands include BetterHelp, HealthiestYou, InTouch Health, and MédecinDirect.

In the first quarter of 2022, Teladoc revenue grew 25% year-over-year (YOY), to $564.4 million. However, its net loss totaled $6,674.5 million, or $(41.58) per share. That’s compared to $199.6 million, or $(1.31) per share, in the prior year’s first quarter.

CEO Jason Gorevic warned that there are “dynamics” the company is currently experiencing in the direct-to-consumer mental health and chronic conditions market. In the former, higher advertising costs are generating a lower yield than expected in Teladoc’s marketing spending. In the latter, health plan companies are evaluating long-term strategies.

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Investing in Healthcare Considerations

When investing in healthcare, look to the long run. Many factors affect stock prices, and the healthcare industry consists of so many sectors. Perform your due diligence on specific areas of the industry by considering demographics, the effects of Medicare or Medicaid funding, potential changes in the regulatory environment, and new trends in medicine. For many investors, mutual funds or ETFs focused on healthcare stocks may prove the best choice.