Everyone seems to be talking about semiconductors, artificial intelligence (AI) and mega-cap tech. However, no one seems to be talking about healthcare stocks to buy.
That said, I get it.
Semiconductor stocks and AI stocks are the exciting plays in the market, while mega-cap tech is powering the S&P 500 higher. In fact, just a handful of names have driven almost all of the year-to-date gains in the index.
While these stocks are dominating the headlines, there are other groups that are pushing 52-week, and in some cases all-time, highs. In some instances, those are defensive consumer names, like PepsiCo (NYSE:PEP) and McDonald’s (NYSE:MCD).
Even more quietly though, it’s been health stocks.
These secular stocks continue to chug higher despite what many consider to be lousy price action from the broader market. The earnings have been pretty good too. In that light, I want to look at a few healthcare stocks hitting new highs.
Eli Lilly (LLY)
Eli Lilly (NYSE:LLY) jumps right to the front of the line. That’s as shares have rallied more than 44% from the March low and have climbed in 9 straight weeks. The rally has been robust as shares have exploded over the prior all-time high near $375.
Interestingly, amid the move was a not-so-hot quarterly report.
The firm reported earnings of $1.62 a share, missing estimates by 11 cents, while revenue slumped more than 10% year-over-year. It didn’t matter though, because management provided strong guidance and the report helped ignite the latest portion of the current rally.
Positive news surrounding its tirzepatide weight-loss therapy and Jaypirca treatment, which is used to treat a type of blood cancer, also helped give the stock a boost.
The stock now quietly sports a market capitalization north of $400 billion and will surely be on investors’ radar to buy on the dip.
Cardinal Health (CAH)
Add Cardinal Health (NYSE:CAH) to the relative strength list as it hits fresh 52-week highs. Another 7% rally from here will vault the stock to all-time highs, as well. This one has been an earnings machine, as it continues to impress investors.
In early February it delivered robust results and strong guidance. In early May, management followed up with another top-line and bottom-line beat as sales of $50.5 billion soared past expectations by almost $1 billion.
Management lifted its full-year earnings outlook and its full-year free cash flow expectations too.
Analysts expect about 13% earnings growth this year and roughly the same growth next year. That’s even as revenue growth is forecast to decelerate to about 6.5% in 2024, down from 12.5% this year. With a dividend yield of about 2.5% and a stock trading at less than 13.5 times next year’s earnings estimates, this is one of several healthcare stocks to buy that investors will be watching.
Merck (MRK)
Like Eli Lilly, Merck (NYSE:MRK) has quietly amassed a market cap of nearly $300 billion. Like Cardinal Health, the stock also pays out a dividend yield of about 2.5% and has a reasonable valuation, trading at about 16.5 times this year’s earnings. Finally, Merck is fresh off all-time highs, as well.
Despite those observations, shares are up just 4.5% so far in 2023. Although, it’s up almost 30% in the past 12 months.
There’s good news and bad news with this stock. On the plus side, it recently delivered strong earnings with a raised and narrowed full-year outlook. Further, estimates for 2024 are encouraging, calling for 6.3% revenue growth and 21% earnings growth.
On the downside, analysts call for a 1% revenue dip and a 6.7% earnings contraction in 2023. If Merck can deliver better-than-expected results while keeping investors excited about 2024, this stock could have more room to run.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.