DONT BE SCARED OF HEALTHCARE

🏥 Healthcare Stocks: Trouble Last Year… But Opportunity Ahead?

Healthcare stocks have been choppy the past 12–18 months. Policy pressure, drug price worries, and the GLP-1 hype cycle cooling off all weighed on the sector. But here’s the twist: legendary investors like Warren Buffett and David Tepper are quietly loading up on some of the biggest names.

So is now the time to make your move? Let’s break it down stock by stock.

🔹UnitedHealth Group (UNH)

📊 Recent Earnings

• Q2 EPS: $6.80 (beat est. $6.65)

• Revenue: $100.9B (+9% YoY)

• Stock Reaction: Jumped ~4% post-earnings, showing investor relief after Medicare cost concerns.

✅ Reasons to Buy

• Largest U.S. insurer, diversified across Optum (data + pharmacy) and UnitedHealthcare (insurance).

• Aging U.S. population = more demand for coverage.

• Buffett & Tepper both buying → confidence signal.

• P/E ~17× = fair vs historical averages.

⚠️ Reasons to Be Cautious

• Policy risk: Medicare cost rules can shake margins.

• Slower premium growth if economy weakens.

• Margins under pressure from higher medical care utilization.

📈 Analyst View: Mostly Buy, price targets $560–$600.

🔹AbbVie (ABBV)

📊 Recent Earnings

• Q2 Adj EPS: $2.97 (est. $2.89) ✅

• Revenue: $15.42B (+6.6% YoY)

• Stock Reaction: +3% post-earnings.

✅ Reasons to Buy

• Transitioning from Humira loss-of-exclusivity → strong growth in Skyrizi (+61%) and Rinvoq (+27%).

• Dividend yield ~3.5% 💰 (higher than peers).

• Strong FCF, attractive payout ratio.

• Diversification in immunology, oncology, neuroscience.

⚠️ Reasons to Be Cautious

• Heavy reliance on immunology pipeline → if Skyrizi/Rinvoq stumble, growth slows.

• Debt still high from Allergan acquisition.

• P/E ~18× — not super cheap.

📈 Analyst View: Moderate Buy, PTs $190–$210.

🔹Merck (MRK)

📊 Recent Earnings

• Q2 EPS: $2.13 (est. $2.05) ✅

• Revenue: $15.8B (flat YoY but beat est.)

• Stock Reaction: Slight uptick, investors encouraged by Keytruda sales.

✅ Reasons to Buy

• Keytruda = monster drug (oncology cash cow).

• New pipeline strength in oncology & respiratory (chronic cough drug approval in focus).

• P/E ~15× = cheaper than LLY/NVO.

• Dividend yield ~2.4%.

⚠️ Reasons to Be Cautious

• Patent cliff risk: Keytruda patent expires later this decade.

• R&D risk—pipeline must deliver to offset.

• Revenue growth slower vs peers like LLY.

📈 Analyst View: Buy, PTs $130–$150.

🔹Eli Lilly (LLY)

📊 Recent Earnings

• Q2 EPS: $3.92 (beat est. $3.61) ✅

• Revenue: $11.3B (+31% YoY, GLP-1 drugs driving)

• Stock Reaction: Beat but stock dipped slightly after big run-up (profit taking).

✅ Reasons to Buy

• Leader in GLP-1 (weight-loss/diabetes drugs) with Mounjaro & Zepbound.

• Pipeline expansion into Alzheimer’s.

• Long-term secular growth theme: obesity + diabetes treatments.

⚠️ Reasons to Be Cautious

• Valuation stretched: P/E ~45× 😬

• Heavy reliance on GLP-1 story—if competitors catch up, growth slows.

• Some supply chain/manufacturing challenges

📈 Analyst View: Strong Buy, PTs $950–$1,050.

🔹 Novo Nordisk (NVO)

📊 Recent Earnings

• Q2 EPS: $1.43 (missed est. $1.48) ❌

• Revenue: $9.6B (+22% YoY but below expectations)

• Stock Reaction: -7% on earnings day → first big pullback in years.

✅ Reasons to Buy

• Ozempic + Wegovy still dominate GLP-1 market.

• Long-term secular tailwinds in weight management.

• Strong pricing power globally.

⚠️ Reasons to Be Cautious

• Valuation premium: P/E ~40×.

• Supply constraints = growth bottleneck.

• Competition heating up (Pfizer, Lilly, Amgen).

📈 Analyst View: Moderate Buy, PTs $130–$145.

🔹 Abbott (ABT)

📊 Recent Earnings

• Q2 EPS: $1.26 (est. $1.22) ✅

• Revenue: $10B (+6.9% YoY)

• Stock Reaction: Mild bounce but stock still ~15% off highs.

✅ Reasons to Buy

• Strong med-tech and diagnostics business.

• Long-term play in continuous glucose monitors (FreeStyle Libre).

• Dividend aristocrat (50+ years of growth).

⚠️ Reasons to Be Cautious

• Growth slower vs peers like LLY/NVO.

• Competition in diabetes tech.

• P/E ~21× = fair, not cheap.

📈 Analyst View: Hold/Buy, PTs $110–$120.

🚦 Final Thoughts

• Most Defensive Play: UNH (stable insurance cash flows).

• Most Balanced Growth + Dividend: ABBV (immunology pipeline + income).

• Cheapest Valuation: MRK (oncology strength).

• High Growth, High Risk: LLY & NVO (GLP-1 giants).

• Steady, Reliable Dividend Aristocrat: ABT.

👉 If you’re young and looking for long-term compounders, starting small positions in a basket of these could make sense. But don’t chase only hype—stick with quality and patience.

🏥 Top Healthcare Stocks Ranked (Best → Worst)

🔥 1. Eli Lilly (LLY)

• 10-Year Performance: 🚀 +1,500% (from ~$55 → ~$950) → easily one of the best stocks in the world.

• Short-Term (1–2 yrs): ⚠️ Valuation rich, but GLP-1 growth keeps momentum.

• Mid-Term (3–5 yrs): ✅ Expanding GLP-1 market + Alzheimer’s pipeline = growth runway.

• Long-Term (5–10 yrs): 🔥 Still dominant in diabetes/obesity → secular demand story.

• Investor Note: One of Buffett’s favorite type of companies (huge moat, pricing power), though Berkshire hasn’t bought in.

🔥 2. Novo Nordisk (NVO)

• 10-Year Performance: 🚀 +1,100% (from ~$12 → ~$145).

• Short-Term: ⚠️ Pulled back on earnings miss & supply bottlenecks.

• Mid-Term: ✅ Still market leader in GLP-1, but competition rising.

• Long-Term: 🔥 Global demand for weight-loss drugs won’t slow.

• Investor Note: Hedge funds like Coatue & Viking Global have been active buyers.

💪 3. UnitedHealth Group (UNH)

• 10-Year Performance: 📈 +600% (from ~$70 → ~$520).

• Short-Term: ✅ Recent rebound after earnings beat.

• Mid-Term: ✅ Medicare Advantage growth + Optum segment expanding.

• Long-Term: 💪 A healthcare “utility” — stable compounding insurer.

• Investor Note: Buffett (Berkshire) + Tepper own UNH = huge vote of confidence.

💵 4. AbbVie (ABBV)

• 10-Year Performance: 📈 +330% (from ~$40 → ~$175), not including fat dividends.

• Short-Term: ⚠️ Transition from Humira → Skyrizi & Rinvoq still being tested.

• Mid-Term: ✅ Growth engines replacing Humira, dividend safety attractive.

• Long-Term: 💵 Solid cash machine, but growth slower than LLY/NVO.

• Investor Note: Bill Nygren (Oakmark Fund) & Dodge & Cox are big holders.

🧪 5. Merck (MRK)

• 10-Year Performance: 📈 +280% (from ~$45 → ~$128).

• Short-Term: ✅ Keytruda sales strong.

• Mid-Term: ⚠️ Patent cliff risk late decade → big challenge.

• Long-Term: 🧪 Pipeline needs to step up, otherwise growth stalls.

• Investor Note: Ken Fisher & Vanguard among biggest institutional holders.

🩺 6. Abbott Labs (ABT)

• 10-Year Performance: 📈 +240% (from ~$35 → ~$120).

• Short-Term: ⚠️ Growth slower vs peers.

• Mid-Term: ✅ Diabetes tech (FreeStyle Libre) still a driver.

• Long-Term: 🩺 Reliable, dividend aristocrat — but not as exciting as GLP-1 plays.

• Investor Note: Long-time favorite of dividend growth funds, held heavily by Vanguard, BlackRock.

🏁 Wrap-Up

• If you want high-octane growth → LLY & NVO 🚀.

• If you want steady compounders → UNH 💪 or ABBV 💵.

• If you want defensive income → MRK 🧪 or ABT 🩺.

📢 My take: A basket approach (mix of LLY/NVO for growth + UNH/ABBV for stability + MRK/ABT for dividends/defense) is the best strategy.

💊 $10,000 Healthcare Portfolio

🚀 Growth Leaders (45%)

• Eli Lilly (LLY) → $2,500 (25%)

  • The crown jewel of healthcare. Massive GLP-1 & Alzheimer’s runway. High valuation = risk, but best growth.

• Novo Nordisk (NVO) → $2,000 (20%)

  • GLP-1 powerhouse. Global demand for weight-loss drugs = secular growth.

  
  

💪 Compounders (35%)

• UnitedHealth (UNH) → $1,750 (17.5%)

  • Buffett/Tepper-backed, insurer + Optum, a defensive beast.

• AbbVie (ABBV) → $1,600 (16%)

  • Dividend powerhouse. Transition away from Humira, but new drugs proving themselves.

  
  

🩺 Defensive Dividend Plays (20%)

• Merck (MRK) → $1,150 (11.5%)

  • Strong oncology (Keytruda) but patent cliffs ahead. Defensive + dividend.

• Abbott (ABT) → $1,000 (10%)

  • Dividend aristocrat, solid in medical devices, but growth slower.

📈 Why This Mix Works

• 45% Growth → Catch the upside from LLY/NVO, even if volatile.

• 35% Compounders → UNH/ABBV smooth out volatility, offer cash flow + stable growth.

• 20% Defense → MRK/ABT = safe, dividend-yielding ballast when market gets rocky.

🔮 Time Horizons

• Short-term (1–2 yrs): ⚠️ LLY & NVO may be choppy (valuations stretched).

• Mid-term (3–5 yrs): ✅ UNH + ABBV steady returns, while growth stocks normalize.

• Long-term (5–10 yrs): 🚀 LLY/NVO still leaders, but the whole basket should compound ~8–12% yearly.