The healthcare sector is one of the largest sectors in the United States and is not expected to change anytime soon. Health expenditures are expected to reach $5.3 trillion in 2025(0).
What is a medical stock?
Medical stocks are stocks in public companies that provide products and services in the medical industry. Medical stocks include hospitals and other medical properties, biotech companies, medical device companies, insurance companies, and more.
9 Best Healthcare Stocks per Year Performance
Below is a list of nine of the best-performing healthcare stocks on the S&P 500, ordered over a one-year performance.
Vertex Pharmaceuticals Inc
Source: Finviz. The data is up to date as of the market closure on 2025-04-30 and is for information purposes only.
Types of healthcare stocks
Healthcare stocks can be broken down into several different industries. Here are some:
Medical facilities and operators
When most people hear the term “healthcare,” the first thing that comes to mind is often the hospital. Additionally, some healthcare stocks are companies that own or operate hospitals, other health facilities, and provider organizations.
Others such as Tenet Healthcare are operators who hire and manage doctors, nurses and technicians to provide medical services to their patients.
Biotechnology and Pharmaceuticals
The biotechnology and pharmaceutical industries produce drugs.
Technically, biotechnology and pharmaceuticals are different. Pharmaceuticals are made from chemicals, while biotechnology is made from living things. However, in the investment context, “biotechnology” and “pharmaceutical” are used more or less the same.
Check out our guide to learn more about these industries Biotechnology Stocks.
Medical Devices
Medical device companies produce non-drug medical products. The industry can be further categorized as healthcare providers and medical device companies.
Healthcare providers such as Patterson Companies produce and distribute basic products used in daily hospitals, such as latex gloves and antibiotic cleaning products.
Medical device companies such as design and manufacturing machines used to treat certain health issues such as Medtronic, Pacemakers and Ventilators.
Health insurance and pharmacy profit management
Health insurance companies and pharmacies benefit managers may be collectively referred to as “payers” as they are arranging payments for healthcare services.
Most people are probably familiar with health insurance companies such as UnitedHealth Group. After all, the majority of Americans have private health insurance, which involves paying premiums to insurers in exchange for payments for most medical services.
Pharmacy profit managers such as Expressscripts coordinate between insurance companies, pharmaceutical companies and healthcare providers to deliver medicines to patients at the lowest possible price (while making profits).
Pros and cons of investing in medical stocks
Many healthcare stocks provide investors with stability and profitability in both good times and bad times. However, this sector is not without risk. Especially when the government is involved.
The advantages of healthcare stocks
Resistance of the Recession: There are no sectors that are completely recessional, but healthcare is better than most during economic recessions. A 2021 paper from the National Economic Research Bureau found that healthcare employment was stable during the recession, and sometimes even increased.
dividend: Healthcare providers, insurance companies, and established biotechnology, pharmaceutical and medical device companies often have substantial cash flows that can pay dividends. Approximately 10% of Dividend nobles – S&P 500 shares, which have increased their payments each year for at least 25 years, is a medical company.
Cons of medical stocks
Political risk: Universal healthcare has been a major topic of discussion in the last few elections, with some proposed reforms going forward to restructuring the sector in ways that could hurt investors, for better or worse.
Regulatory risk: Even today's privatized US healthcare systems, regulatory measures can create and destroy healthcare companies. Failure to obtain FDA approval could lead to experimental biotechnology, pharmaceutical companies, or medical device companies, and many hospitals rely on funding from Medicare and Medicaid to continue operating.
How to buy medical stocks
The first step to investing in medical stocks is Securities account. Next, you need to know how you want to invest. It means buying individual shares or buying funds.
Individual healthcare stocks
Investing in certain healthcare stocks may be attractive. After all, many of the above stocks have been very common in recent years.
However, betting too much on individual stocks is risky. Also, buying some individual healthcare stocks is expensive. Individual stock pickers should also be Research stock It may take some time before you buy.
Do you need low-risk investments?
This financial account has an a 4.37%apy-and tax benefits of T-Building.
Healthcare Stock ETF
Another way to benefit from investing in some healthcare stocks is Transaction Funds or ETFs – Dozens of these are available.
Some healthcare ETFs, such as the Healthcare SPDR Select Sector Fund, are sector-wide ETFs. Basically, health care Index funds – Includes companies from all the industries mentioned above.
Others are more industry-specific. For example, the Ishares US Medical Devices ETF focuses on the healthcare industry.
Researching an ETF is generally much faster than examining the individual inventory of that ETF, but it is still important. Consider searching for ETF portfolios before investing.
Options and Healthcare Stocks
Healthcare stocks often pay dividends. And sophisticated investors may be able to generate even more income from them by selling options. That might mean Sales put options About medical stocks they want to buy or sell Cover Call About the medical stocks they already own.
FAQ
What is the difference in investments between different types of healthcare stocks?
Will healthcare reform hurt all health stocks?
Are profits from medical stocks tax-free?
Neither the author nor the editor performed their duties in the aforementioned investments at the time of publication.
