2 ‘hidden’ healthcare stocks I would buy and hold

These two healthcare stocks may be under the radar, but I believe they could bring great returns.

| More on:

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.

The healthcare sector can be a very lucrative market to invest in, but it can also be incredibly hard to predict. The two healthcare stocks I’m going to talk about today have a relatively low profile despite their attractive offerings, which I believe is a good thing. 

I would buy these two stocks and hold them for the long term in order to reap the rewards that they could potentially offer.

Breathe easy

Vectura Group (LSE: VEC) develops respiratory products for asthma and smokers cough, which is actually one of the leading causes of death worldwide. Vectura is a global leader in this sector with a strong track record. For example, the company’s technology is used in half of the new inhalers launched from 2012 to 2016, showing how it has made a major impact on the market.

Furthermore, it got a big boost in May after winning a patent battle with healthcare giant GlaxoSmithKline. The company was awarded $89.7m when it was proved that GSK’s inhalers infringed on its patents. Shares in Vectura jumped 11% in May to 80.2p and have since only slightly dropped to around 79p at the time of writing.

Analysts predict that VEC will grow in terms of income 67% year-on-year which is an extremely promising outlook. The company is expected by analysts to break even by 2020, making a profit of £12m by 2021. I would consider investing now, to reap the rewards this company could offer in later years.

Moreover, the smart inhaler technology market is booming at the moment as pharmaceutical companies aim to focus on and push digital health. Vectura is one of the leading companies looking to develop more of this technology. With rising demand, it’s easy to see how Vectura should continue to grow and why I would consider investing.

Supporting the healthcare market

UDG Healthcare (LSE: UDG) helps pharmaceutical companies get their products to the market, providing packaging, transportation and education. Essentially, the company provides services that allow pharmaceutical companies to focus on their main business while outsourcing services to UDG. Services being outsourced is a major trend in the healthcare market and one that UDG is poised to continue benefiting from.

Its shares surged in May after it acquired two UK and US consultancy businesses for $106m. These acquisitions should boost growth at the company, giving it a wider reach and more clients for which it can provide its services. Acquisition is a key strategy for UDG: since 2012, it has acquired 21 companies and doesn’t show any signs of slowing down.

With a share price of 705p at the time of writing, a dividend yield of 1.8%, and analyst predictions of UDG’s earnings per share rising by 5% this year, it certainly seems to have potential. The yield may be lower than most of us would like, but its future potential (and its past performance) are enough for me to believe that this stock is worth the investment, especially as more and more pharmaceutical companies seem to be looking to outsource the services that UDG is ready to provide.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

fional has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended UDG Healthcare. 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.

More on Investing Articles

Young brown woman delighted with what she sees on her screen
Investing Articles

A FTSE 100 passive income stock I’ve bought to hold for 30 years!

This FTSE 100 stock has proved to be a brilliant buy for passive income over the past decade. Here's why…

Read more »

Modern suburban family houses with car on driveway
Investing Articles

Should I snap up Taylor Wimpey shares at £1.30?

With the Taylor Wimpey share price down by almost 30% this year, should I snap up some shares while it's…

Read more »

Young female analyst working at her desk in the office
Investing Articles

How I’m finding shares to buy now – and keep for a decade

Our writer has been looking for shares to buy using an approach that looks both at long-term profit prospects and…

Read more »

Bearded man writing on notepad in front of computer
Investing Articles

What’s happening to the Petrofac (PFC) share price?

The Petrofac (LON:PFC) share price has had a seriously erratic year so far. I take a look at the latest…

Read more »

Young black woman in a wheelchair working online from home
Investing Articles

The Aviva share price is flying! Should I buy this 7% yield?

Despite recent gains, Roland Head thinks the Aviva share price could still be too cheap.

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

Here’s 1 passive income opportunity not to be missed!

This Fool details a passive income opportunity that could bolster his holdings, and the shares trading at cheap levels too.

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

The Legal & General share price is dirt-cheap with a juicy dividend yield!

Jabran Khan takes a closer look at the Legal & General share price which looks like an opportunity to boost…

Read more »

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home
Investing Articles

If I’d invested £1,000 in this top lithium stock 5 years ago, here’s how much I’d have now!

This lithium stock has gone from strength to strength over the past year. But has it flown too high, or…

Read more »