If you’re looking for great growth opportunities to invest in, look no further than the healthcare sector. Healthcare stocks have been big winners in recent years and the future looks even brighter.
We asked three Fool.com contributors to pick their top healthcare stocks to buy right now. They chose DaVita (NYSE: DVA), PRA Health Sciences (NASDAQ: PRAH), and Teladoc Health (NYSE: TDOC). Here’s why these three stocks look like winners.
This long-term patient trend is your friend
Sean Williams (DaVita): Sometimes the best healthcare stocks to buy are the ones that make you do the least amount of thinking. That’s why Warren Buffett holding DaVita is a worth a much closer look.
DaVita is one of the largest providers of outpatient dialysis services in the United States, with 2,625 centers servicing 201,000 patients. Although estimates vary, the consensus among Wall Street analysts is that it controls about 35% of the outpatient dialysis market. Additionally, DaVita runs 251 outpatient dialysis centers in 10 countries outside the U.S.
DaVita’s size presents both a promise and a peril. The company comes under scrutiny on occasion for reimbursements from Medicare in the U.S., but at the same time it should benefit from a numbers game that unequivocally favors it over the long run. More specifically, the U.S. Census Bureau’s 2017 National Population Projections suggest that one in every five residents will be of retirement age by 2030. Retirees are far likelier to require dialysis than younger folks, priming DaVita to succeed based on the sheer volume of patients.
In addition, the company’s 201,000 patients as of Sept. 30, 2018, will be a drop in the bucket compared to the number of global dialysis patients the company should be treating by 2030. In the U.S., this should provide DaVita with more leverage when negotiating on reimbursements with private insurance companies and possibly even the federal government.
While some folks might be turned off by DaVita’s profit slump in 2018, I primarily attribute this to a one-time gain in 2017 that wasn’t recognized in 2018. That aside, revenue growth should still be in the mid-to-upper single digits when all is said and done for the full year. With a genuine opportunity to more than double its earnings per share between 2018 and 2021, DaVita looks ripe for the picking.