Best Health Care Stocks for September 2024

The health care sector—composed of companies offering medical services, making medical equipment or drugs, and providing insurance—may be attractive to investors because it is extremely varied, including everything from upstart pharmaceutical companies to major insurers, and it has the potential for outsized returns. Still, health care is one of the broadest and most complicated sectors, and investors would be wise to understand the many variables impacting the performance of health care companies before investing.

Below, we explore some of the top health care stocks for September 2024, based on highest 30-day percentage return. A detailed explanation of our methodology is included below. All data are current as of Aug. 16, 2024.

What to Know About the Health Care Sector

Health care was one of the most heavily impacted sectors during the COVID-19 pandemic, with massive changes to insurance, the availability of in-person medical appointments, demand for new products, and more. Fortunately, the sector's rebound is continuing apace. Major issues impacting the sector now include the growing population of individuals eligible for both Medicaid and Medicare, the rapid advancement of technology impacting health care services and delivery businesses, and the continued increase in focus on specialty pharmacies.

A key trend to watch includes the meteoric rise of weight-loss drugs like Ozempic. An estimated 500 million adults around the world have obesity, making the market for weight-loss medicines immense. Providers of leading weight-loss medications, including Novo Nordisk A/S (NVO) and Eli Lilly and Co. (LLY), have already reaped the benefits with increased investment, but many other health care companies stand to benefit as well.

Health care profit pools are expected to grow at a compound annual growth rate (CAGR) of 7% through 2027, climbing to an expected $819 billion from $583 billion in 2022.

How We Chose the Best Health Care Stocks

Our screen for the best health care stocks takes into consideration several factors. We included in our search only firms listed on the Nasdaq or the New York Stock Exchange, with a stock price of at least $5 per share, a minimum daily trading volume of at least 100,000, and a minimum market capitalization of $300 million. From that subset of health care stocks, we ranked firms according to the highest 30-day percentage return.

Note that price-to-earnings ratio is customarily included in our screens, but only one of the companies in the top 10 positions based on 30-day return has a P/E ratio. Companies without a P/E ratio often have generated no earnings or taken a loss in the relevant time period. It is common for clinical-stage pharmaceuticals companies to post many quarters of negative net income, as they are unable to generate profit without having a significant drug product available for sale. Then, when a company in this category develops a product with substantial popularity or potential, it is common to see massive spikes in stock price to follow.

Health Care Stock Advantages and Disadvantages

One important advantage of the health care sector is consistent demand. The overall demand for products and services related to health care is likely to remain steady or even increase over time, particularly as populations age. The aging baby boomer population, for instance, has prompted the Centers for Medicare and Medicaid Services to predict nationwide health care expenditures of $6.8 trillion by 2030.

Another important advantage of health care stocks is the massive incentive for companies to continue to develop and utilize new technology, both in competition with other participants in the sector and to improve the quality and affordability of care for patients. This means that health care stocks often provide opportunities for short- and long-term growth.

A third advantage of health care is that individual companies commonly enjoy massive increases in stock price based on promising clinical trials or the release of a new drug with significant potential. Investors may be able to benefit from these major gains.

But investing in health care stocks carries risks as well. As mentioned above, it is an enormous and highly complex sector, and investors may find it daunting to approach investing in health care stocks for the first time. Further, legislation can play a significant role in the industry, leading to an increase in unpredictability. Finally, predicting which companies may see major success with a new health care product or service can be nearly impossible for those without industry expertise.

While there are opportunities for strong returns within the health care sector, it is important to note that no one can predict what will happen regarding stock prices, and past performance is not a guarantee of future performance.

The Bottom Line

Health care is a complex sector including a host of companies operating in many different industries and areas. Some of the most notable stocks in this sector based on metrics like 30-day return include pharmaceuticals firms working to develop and market new treatments for a variety of conditions. These companies can experience massive spikes in share price and interest based on positive clinical trial results or the release of a new drug, for example. At the same time, the hype can be overblown if a drug candidate does not make it to approval and sale on the market.

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As of the date this article was written, the author does not own any of the above securities.