Best Healthcare Stocks to Buy After the Market Pullback
Why it matters: Market pullbacks create strategic entry points for resilient healthcare stocks with strong long-term growth prospects.
- Equity markets have experienced a downturn over the past three weeks due to global trade and geopolitical issues, but are expected to recover.
- CVS Health shares dropped after proposed Medicare Advantage payment rates for 2027 showed minimal increase (0.09% year-over-year), below analyst expectations, and rising costs impacted Q4 earnings.
- CVS's CEO, David Joyner, stated that the proposed rate "simply does not match the level of medical cost trend in the industry," indicating potential margin pressure.
- CVS Health plans to scale back its Medicare Advantage operations to focus on profitable growth, leveraging its diversified business, retail footprint, and patient relationships to navigate challenges.
- AbbVie's shares became volatile after Q4 earnings, reflecting investor discomfort with its continued reliance on Humira, which lost U.S. patent exclusivity in 2023 and is seeing declining sales.
- AbbVie's main growth drivers, Skyrizi and Rinvoq, are performing strongly, with management projecting over $31 billion in combined sales this year, significantly surpassing Humira's peak revenue.
Despite recent market pullbacks driven by global trade and geopolitical concerns, the healthcare sector presents compelling long-term investment opportunities, particularly in companies like CVS Health and AbbVie, whose shares have dipped but retain strong fundamentals. While CVS faces challenges from stagnant Medicare Advantage payment rates and rising costs, its diversified business and strategic shift towards profitable growth offer resilience. AbbVie, though grappling with declining Humira sales post-patent expiration, is poised for future growth through its immunology blockbusters Skyrizi and Rinvoq.
