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2 ‘hidden’ healthcare stocks I would buy and hold

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.

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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.