The Motley Fool

2 top healthcare stocks I’d buy right now

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Pills spilling out of a prescription pot
Image source: Getty Images.

One has to look no further than this morning’s news of an ambitious healthcare tie-up between corporate giants JP Morgan, Amazon and Berkshire Hathaway to understand just how big an issue runaway healthcare spending is becoming for both corporations and governments across the developed world.

But with no signs of spending slowing down in the US, UK or anywhere else, investors looking to benefit from this trend will find plenty of potential opportunities. One that I’ve got my eye on is UDG Healthcare (LSE: UDG), which is a provider of non-core services such as commercial marketing, packaging and communications for global drug makers.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

UDG has benefited from these customers moving to outsource these essential but non-core services as a means of improving margins under relentless shareholder pressure. This trend, together with a slew of acquisitions that have turned it into a global leader in its markets, has sent the group’s share price up 25% over the past year alone.

Judging by the company’s Q1 trading update released this morning, investors have been right to be bullish as management is guiding for a whopping 18%-21% uplift in earnings per share for the full year to October. The group’s commercialisation division, Ashfield, is the main driver of growth and management said its operating profits were significantly ahead of the prior year’s due to acquisitions and organic growth as drug makers continue to bring huge volumes of new treatments to market.

While there were short-term issues with the packaging division, management expects these to reverse in H2 which, alongside falling US tax rates and growth in other divisions, should still leave investors very happy for the full year. With industry tailwinds at its back, a healthy balance sheet providing ammunition for further acquisitions, and massive growth opportunities, I think UDG Healthcare is still attractively valued even at 25 times forward earnings.

Underpinning critical research the world over  

Another healthcare stock on my radar is research tool provider Abcam (LSE: ABC). It provides academic pharma and biotech laboratories with research-grade antibodies that they need to conduct experiments.

This proposition has proven very attractive to scientists in recent years and as a result, Abcam has been growing very rapidly. In H1 alone revenue was 10% ahead of the year prior as each of its product categories grew sales faster than overall market growth.

Future growth opportunities also exist in broadening the group’s geographic reach, particularly in the massive Chinese market. Last year China accounted for only 13% of group revenue, but the country is becoming increasingly important with sales in the region up 24% year-on-year in H1.

There’s also the possibility of organic growth continuing to be buttressed by selective acquisitions that are well within the group’s capabilities. At year-end it had a pile of cash totalling £84.8m. And closing cash balances were well ahead of the year prior due to the highly profitable nature of the company’s business, with EBITDA margins of 32.5% recorded last year.

Abcam’s shares aren’t cheap at 39 times forward earnings, but with significant cash generation, impressive margins and continued double-digit sales growth, I think the business is still one I’d love to own for the long term.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon and Berkshire Hathaway (B shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.