The S&P 500 has remained red hot, achieving gains of nearly 15% through the first six months of 2024. Healthcare stocks have performed well, but not nearly to the same extent -- the Healthcare Select Sector SPDR ETF has risen by 7% during the first half of this year.
Healthcare stocks may not generate as much excitement as other growth stocks, but there are some solid options that you can buy and hold, not just for the second part of the year, but for the long haul. Three healthcare stocks that have normally performed exceptionally well in the latter half of the calendar year are Intuitive Surgical (NASDAQ: ISRG), UnitedHealth Group (NYSE: UNH), and Agilent Technologies (NYSE: A). These stocks have averaged second-half returns of at least 13% over the past 10 years, and with strong fundamentals, it may not be a stretch for them to be good buys in the latter half of 2024 as well.
1. Intuitive Surgical
Intuitive Surgical has been one of the top growth stocks to own in the healthcare industry for years. The company's robotic-assisted surgical devices are game changers for surgeons, allowing them to perform more difficult surgeries with greater precision. That has translated into impressive growth for the company over the years with its revenue topping $7.1 billion in 2023 -- that's more than 3 times the $2.1 billion it reported nearly a decade earlier in 2014. Not surprisingly, its profits have taken a similar trajectory, soaring from just under $420 million in 2014 to $1.8 billion this past year.
Historically, Intuitive Surgical has performed well during the second half of the year. Here are its returns over the past 10 years, during the period of July through to the end of December.
| Year | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | Average |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Returns | 28.4% | 12.7% | (4.1%) | 17% | 0.1% | 12.7% | 43.6% | 17.2% | 32.2% | (1.3%) | 15.9% |
Data source: YCharts.
On average, the stock has generated solid returns of nearly 16%. There has been the odd year where it has incurred a negative return, but overall, it has been one of the better healthcare stocks to own in the second half. There's nothing specifically to do with the time frame which has led to the strong results. The stock's impressive performance has more to do with the business possessing outstanding growth opportunities along with the ability to capitalize on them. With a strong demand for artificial intelligence and robotics in healthcare, its future remains bright.
The stock did see a bit of a decline a year ago as COVID interrupted normal healthcare operations. But now, with the industry resuming normal operations, Intuitive should be in good shape to continue growing its operations at a solid pace. And given the impact its surgical devices can have for the long term, Intuitive is a solid stock to own for the second half of the year, and it can also be a great investment to hang on to forever.
2. UnitedHealth Group
Health insurance giant UnitedHealth is one of my favorite healthcare stocks. What's great about the business is that it can easily grow along with the healthcare industry. As more patients need care, UnitedHealth can provide them with the coverage they need. And it has also been investing in growing its operations through acquisitions, such as its $5.4 billion acquisition of home health company LHC Group last year.
By making solid, calculated moves, and acquisitions, UnitedHealth has achieved impressive revenue and profit growth. Its 2014 revenue was over $130 billion and it soared to nearly $372 billion last year. The bigger jump was on the bottom line, with profits quadrupling from $5.6 billion to $22.4 billion.
Below are the stock's returns in the second half of the year since 2014.
| Year | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | Average |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Returns | 23.7% | (3.6%) | 13.3% | 18.9% | 1.5% | 20.5% | 18.9% | 25.4% | 3.2% | 9.5% | 13.1% |
Data source: YCharts.
UnitedHealth has consistently been one of the better growth stocks in the healthcare industry given its important role as key health insurance provider, and its appetite for growth and acquisitions. It can do well regardless of whether you buy it in the second half or the first half of the year. Its second-half returns have been a bit weaker than usual in the past few years, however, because of COVID-related interruptions in the industry.
And UnitedHealth still hasn't been doing well this year with its stock price down 7% due to rising medical costs. But if those concerns subside and costs start to come down, that could be the catalyst UnitedHealth needs for its stock to take off in the second half again. But ideally you're holding onto the stock for the long haul, in which case you won't have to worry about temporary economic factors; UnitedHealth makes for a solid long-term investment to hang on to for not just months or quarters but decades.
3. Agilent Technologies
Rounding out this list of top-performing healthcare stocks is Agilent Technologies. It provides essentials for the healthcare industry through instruments and laboratory consumables. Not unlike UnitedHealth, it's in a great position to grow with the healthcare industry as a whole.
It isn't the growth beast that the other stocks on this list are, but Agilent has done well nonetheless, with the company achieving steady growth over the years on both its top and bottom lines.
A Revenue (Annual) data by YCharts.
Liked UnitedHealth, Agilent has been struggling this year with its stock down 9% as it faces tough market conditions. In the period ended on April 30, the company reported $1.6 billion in revenue, which was down 8% year over year. While management says it is seeing resiliency due to its diversified business model, market conditions are improving at a slower rate than it hoped.
Agilent has, however fared well over the years, particularly in the second half, where its average return has also been around 13%.
| Year | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | Average |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Returns | (0.3%) | 8.4% | 2.7% | 12.9% | 9.1% | 14.3% | 34.1% | 8% | 26% | 15.6% | 13.1% |
Data source: YCharts.
There hasn't necessarily been a specific catalyst in the back half of the year, which has helped Agilent achieve significant gains. But in 2020 there was a lot of bullishness around diagnostics and testing companies like Agilent due to the pandemic, which has helped bump up its 10-year average returns during the second half. Gains like that are improbable now but with a strong and steady business, trading a reasonable forward price-to-earnings multiple of 22 (which is around the healthcare industry average of 20), Agilent still has the potential to deliver some good returns in the latter half of 2024 and beyond as it continues to grow its operations.
While Agilent isn't one of the bigger-name healthcare stocks to own, it has proven itself to be a solid buy over the years, and with an important position in the healthcare industry, it can remain that way for the foreseeable future.
Should you invest $1,000 in Intuitive Surgical right now?
Before you buy stock in Intuitive Surgical, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Intuitive Surgical wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $791,929!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of July 8, 2024
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intuitive Surgical. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.
