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3 Healthcare Stocks to Watch for Short-Term Trading in 2023

Healthcare stocks include companies that provide medical services, develop and manufacture drugs and devices, sell health insurance, and operate health facilities.

In this blog post, we will highlight three healthcare stocks that might be suitable for short-term trading, given their potential for volatility and liquidity. These stocks are UnitedHealth Group (UNH), Eli Lilly (LLY), and Abbott Laboratories (ABT).

UnitedHealth Group (UNH)

Overview of UnitedHealth Group

UnitedHealth Group operates through two main segments: UnitedHealthcare, which offers health insurance and related services, and Optum, which provides health information technology, pharmacy benefits management, and health care delivery solutions. The company has a strong competitive position in both segments, with a large and loyal customer base, a diversified product portfolio, and a wide network of providers and partners.

One of the company's main competitors is Johnson & Johnson (JNJ), which is also a leading healthcare company with a diversified business across pharmaceuticals, medical devices, and consumer products. However, UNH has a higher market capitalization than JNJ, with $381 billion as of October 8, 2023, compared to $367 billion for JNJ.

This could be significant for several reasons:

  • It might indicate that investors have more confidence in UNH’s future growth prospects compared to JNJ.
  • It could also suggest that UNH has more resources at its disposal for things like acquisitions, research and development, etc.
  • From an investment perspective, some might view UNH as a potentially safer investment due to its larger size.

However, it’s important to note that market cap is just one aspect of a company’s financial health and potential for growth. Other factors such as earnings, revenue growth, debt levels, and more should also be considered when evaluating a company.

In addition to having a higher market capitalization, UNH has also demonstrated a superior 10-year average annualised return of 19.7%, compared to JNJ's 12.9%. However, it’s important to consider the fluctuations in these returns over this period, as stock performance doesn’t follow a straight line but varies within a certain range.

Stock Performance and Growth Prospects

UnitedHealth Group (UNH) has consistently demonstrated robust performance in recent years. As of October 6, 2023, UNH's stock price stood at $524.811, with a 12-month total return of 2.58%.

In contrast, the S&P 500 index, often used as a gauge for the broader U.S. stock market, posted a 12-month total return of 16.48%3 during the same period.

Turning our attention to the healthcare sector, while we lack specific percentage figures, it's important to highlight that companies within this sector have witnessed an impressive annual earnings growth rate of 23% over the past three years.

The company's growth prospects could be considered bright, as it continues to benefit from the increasing demand for healthcare services, especially in the wake of the COVID-19 pandemic. The company has been investing in innovation and digital transformation, enhancing its capabilities and offerings to meet the evolving needs of its customers. The company has also been expanding its presence and reach through strategic mergers and acquisitions, such as the recent deal to acquire Change Healthcare, a leading provider of revenue cycle management solutions.

Why UNH is a Potential Pick for Short-Term Trading

The company is expected to report strong results for the third quarter of 2023, which will be announced on October 13. Analysts expect the company to post a rebound in sales and operational growth, driven by higher enrollment, premium growth, and improved medical cost trends. The company is also expected to report an increase in earnings per share (EPS), from $3.51 in Q3 2022 to $4.12 in Q3 2023.

Eli Lilly (LLY)

Overview of Eli Lilly and Company

Eli Lilly and Company is one of the leading pharmaceutical companies in the world, specialising in brand-name prescription drugs for various medical conditions such as diabetes, cancer, immunology, neuroscience, and pain.

Eli Lilly has been growing its revenue steadily over the years, with a CAGR of 6.4% from 2016 to 2020. The company has also been improving its profitability and efficiency, with a gross margin of 78% and an operating margin of 27% in 2020.

Stock Performance and Growth Prospects

The company's growth prospects seem to be bright, as it continues to innovate and launch new drugs that address unmet medical needs. For example, the company recently received approval for Verzenio, a breast cancer drug, and Tirzepatide, a diabetes drug. The company also has a robust pipeline of potential drugs in various stages of development, targeting areas such as Alzheimer's disease, migraine, and COVID-19.

One of the reasons why someone might consider investing in Eli Lilly is that it has a loyal customer base and a strong brand recognition, which help it maintain its market share and pricing power.

Why LLY is a Potential Pick for Short-Term Trading

It has high volatility and liquidity, which are crucial for traders who want to exploit price fluctuations. The company's stock also has an average daily volume of over 3 million shares, meaning that it is easy to buy and sell without affecting the price too much.

Another reason is that it is expected to maintain its momentum and growth in the coming quarters, as it benefits from its new product launches and pipeline progress.

Eli Lilly is not only a leading pharmaceutical company but a potential pick for short-term trading. The company's stock performance, growth prospects, and earnings potential make it an appealing option for traders.

Abbott Laboratories (ABT)

Overview of Abbott Labs

Abbott Laboratories is a diversified health care company that operates in four segments: established pharmaceuticals, diagnostics, medical devices, and nutrition.

The company offers a range of products such as research-based drugs, medical devices, pharmaceuticals, nutritional supplements, and diagnostic tests.

Abbott Labs has been growing its revenue consistently over the years, with a CAGR of 7.8% from 2016 to 2020. The company has also been improving its profitability and efficiency, with a gross margin of 58% and an operating margin of 17% in 2020.

Stock Performance and Growth Prospects

Abbott Labs' stock performance has been outstanding in the past year, soaring by over 40% and outperforming the healthcare sector and the broader market. The company has also shown strong earnings growth, with an EPS CAGR of 16.5% from 2016 to 2020.

The company's growth prospects continue to innovate and launch new products that address the growing demand for health care solutions. For example, the company recently received approval for its HIV blood screening test that can detect the virus in less than five minutes. The company also has a leading position in the COVID-19 testing market, with its rapid antigen test being widely used across the world.

Abbott Labs offers exposure to multiple segments of the healthcare industry, which can help diversify risk and capture growth opportunities. The company also has a strong balance sheet, with a low debt-to-equity ratio and a high interest coverage ratio.

Why ABT is a Potential Pick for Short-Term Trading

It has high volatility and liquidity, which are vital for traders who want to take advantage of price movements. The company's stock has a beta of 0.91, meaning that it moves more than the market average. The company's stock also has an average daily volume of over 5 million shares, meaning that it is easy to buy and sell without affecting the price too much.

Abbott Labs is not only a diversified health care company but also an attractive short-term trading opportunity. The company's stock performance, growth prospects, and earnings potential make it an enticing option for traders.

Conclusion

These three stocks have great short term trading potential. However, it is important to note that short-term trading is also more risky, and traders should carefully manage their risk and exposure. It is advisable for traders to conduct thorough research and remain vigilant about developments in the stock market.

The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients.

Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.