5 Best Healthcare Stocks to Buy in September 2021

The healthcare industry is quite heterogeneous in nature. Established pharmaceutical companies, clinical-stage biotech companies, hospital companies, healthcare equipment companies, diagnostics companies, medical insurance companies, and health tech companies form part of the healthcare ecosystem.

With the exception of clinical-stage companies, healthcare stocks are generally defensive in nature. With the chatter growing for shifting some of your portfolio to defensive stocks, here are the five best healthcare stocks that you can buy in September 2021.

1. Moderna (NYSE: MRNA)

With a year-to-date gain of 272%, Moderna is outperforming other healthcare stocks by a wide margin. The company’s COVID-19 vaccine has an emergency use authorization and like the Pfizer BioNTech jab, it has also filed for a full FDA (Food and Drug Administration) approval. If the vaccine gets full FDA approval, it could help lift the stock even further. Notably, BioNTech stock had also surged after its COVID-19 vaccine received full FDA approval.

In a related move, Moderna has also filed with the FDA to allow a third booster short for its COVID-19 vaccine. Later this month, the regulator would decide on whether to approve Pfizer’s booster shot. Currently, the FDA allows booster shots only for people with weak immune systems. An approval to allow the third booster shot would be another key driver for Moderna stock.

Meanwhile, White House chief medical advisor Dr. Anthony Fauci has said that the booster doses for Moderna vaccines could be delayed.

Moderna is among the best healthcare stocks

As the COVID-19 pandemic shows no signs of going away, Moderna is among the best healthcare stocks to own. Meanwhile, Wall Street is not too bullish on this healthcare stock and consensus estimates call for a downside of 15.3% over the next 12 months. Its street high target price of $463 is a premium of 11.1% while the lowest target price of $85 is a discount of almost 80%.

Of the 17 analysts covering Moderna, only five have rated it as a buy while eight rate it as a hold. The remaining four analysts have a sell rating on Moderna stock. Meanwhile, Bank of America analyst Geoff Meacham is very bearish on the stock and terms the current valuations as “ridiculous.” However, some others disagree. Stephen Weiss, chief investment officer at Short Hills Capital Partners believes that Moderna is a long-term play and would benefit from the booster shots.

All said, investors have been willing to pay a premium for the Moderna stock despite concerns over its valuations exceeding that of some of the bigger healthcare stocks. Overall, looking at the COVID-19 situation, Moderna is among the best healthcare stocks to buy.

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2. GlaxoSmithKline (NYSE: GSK)

GSK stock is up only about 10% in 2021 and is underperforming the S&P 500. The stock’s long-term price action has been even depressing and it has lost 2% over the last five years. US stock markets have delivered strong returns over the period. However, after the massive underperformance, GSK looks like a good healthcare stock to buy now.

GSK is a good healthcare stock to buy

If you are looking for a stock with a high dividend yield, GSK is among the best healthcare stocks to buy with a dividend yield of 5.3%. the yield is way above the S&P 500’s dividend yield. Wall Street analysts are not too bullish on GSK stock though and only seven of the 24 analysts covering it rate it as a buy. The vast majority, 13 to be precise, rate it as hold while the remaining two analysts rate the healthcare stock as a sell. Its median target price of $43.52 is a premium of 4.6%. The street high target price of $53.08 implies an upside potential of 27.5% over the next 12 months.

GSK stock trades at an NTM (next-12 months) PE multiple of 14x which is in line with its 10-year average.

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3. Clover Health (NYSE: CLOV)

Clover Health is a health tech company offering Medicare Advantage plans in the US. The company went public through a reverse merger with one of Chamath Palihapitiya’s SPAC (special purpose acquisition company) and has been very volatile since then. It had tumbled after Hindenburg Research accused it of hiding material facts. However, a Reddit-driven short squeeze led to a sharp rise in this healthcare stock.

The stock currently trades below the SPAC IPO price of $10 and is among the best healthcare stocks to buy. Clover Health is a fast-growing company and it’s the fastest-growing Medicare Advantage plan in the US. Palihapitiya believes that CLOV is a “10x idea” and called it “one of the most straightforward investments I’ve ever made.” Analysts expect the company’s revenues to rise 21.7% in 2021 and 30.4% in 2022.

CLOV looks like a good healthcare stock to buy

Clover Health is expected to become profitable on the EBITDA level by 2023 and is a bet on the growing Medicare spending in the US which by estimates is expected to double between 2019 and 2025.

Amid the meme stock rally, Bank of America and JPMorgan had downgraded CLOV stock. “We are downgrading shares of CLOV to Underweight from Neutral following 1Q21 results in which the company lowered most guidance metrics, including reducing the number of aligned beneficiaries under the direct contracting program in 2021 by 50%,” said JPMorgan analyst Lisa Gill in her note. The brokerage also lowered CLOV’s target price from $15 to $9.

If you are looking at a growth stock in the industry which is typically marred by tepid growth, CLOV looks like a good healthcare stock to buy. The stock could be a multibagger in the long term if the management can deliver on the business projections.

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4. Intuitive Surgical (NYSE: ISRG)

With a year-to-date rise of 34%, ISRG stock is outperforming the markets. Despite the outperformance, it still looks among the best healthcare stocks to buy in September. Its da Vinci robotic surgical system has been used in millions of surgeries. Notably, some of the healthcare stocks were negatively impacted in 2020 as elective surgeries took a backseat as addressing the COVID-19 pandemic was the biggest priority for the healthcare sector.

However, there is a strong pent-up demand for elective surgeries, just as we have seen high demand for travel and entertainment after the slump in 2020.

ISRG looks among the best healthcare stocks

ISRG is among the best healthcare stocks looking at its strong business franchise. Wall Street analysts aren’t too bullish though and its median target price of $1,030 is a discount of 3.9% over current prices. Eight of the 19 analysts covering the stock rate it as a buy while nine rate them as a hold. The remaining two have a sell rating.

ISRG stock trades at an NTM PE of 70.8x which is the highest since it was listed. The stock could see some correction from these levels looking at the stretched valuations. However, if the stock falls from these levels, it would be a good buying opportunity for long-term investors.

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5. Vertex Pharmaceuticals (NYSE: VRTX)

Vertex Pharmaceuticals stock is down almost 14% in 2021 and is underperforming the markets. However, the underperformance looks like a good opportunity to buy this quality healthcare stock. Wall Street analysts are also bullish on the stock.

Of the 27 analysts covering VRTX stock, 21 rate it as a buy or some equivalent. Four analysts rate it as a hold while the remaining two analysts rate it as a sell. Its median target price of $260 implies an upside of 31.3% over current prices. The stock’s highest target price of $331 is a premium of 67% over current prices.

VRTX stock trades at an NTM PE of 15.9x which looks very attractive. The multiple has averaged 20.6x over the last year. The valuation discount is even steeper as compared to the long-term averages and the stock’s forward PE has averaged 41.7x over the last five years.

Jim Cramer, the host of the Mad Money show on CNBC is also bullish on VRTX stock and sees the fall in the stock as a buying opportunity. If you are looking at a healthcare stock with a strong growth outlook and tepid valuations, VRTX looks among the best bets.

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