These Are The Top Health Stocks to Own for Buy-and-Hold Investing

Key Points

• Abbott Laboratories is the #1 healthcare stock to own over the long term, providing a market-beating compound return.
• Intuitive Surgical is growing its installed base and procedure volume, providing leveraged growth for investors. 
• UnitedHealth Group is growing despite the business headwinds and can sustain capital returns and capital return growth over the long term. 

Investors looking for health-related buy-and-hold stocks must look no further than this list. The stocks on this list are market leaders in healthcare, producing sustainable growth with healthy balance sheets, impressive value, and broad market support. 

Abbott Laboratories Is the Number One Health Stock for Long-Term Investment

study by Arizona State finance professor Hendrik Bessembinder found that Abbott Laboratories NYSE: ABT is the top-returning healthcare stock since the Great Depression. His study focused on compound returns, finding Abbott the 11th top-returning stock overall and #1 in healthcare with an annualized compound return of 13.85%. The key takeaway from the report is that time is important. Some stocks may grow faster but cannot sustain the pace over the long term. Abbott is a proven winner, focused on the long term. 

Abbott’s growth trajectory is sustained by a healthy portfolio that includes established pharmaceuticals, diversification, and a robust pipeline that ensures growth can be sustained. In 2024, the leading segment is Medical Devices, which grew by 11.7% in Q3 to produce a beat-and-raise quarter.  Diagnostics and Nutrition both contracted by slim margins, with reported growth expected to resume in F2025. One-offs, including COVID-19 and divestitures, impact the diagnostic and nutrition segments: adjusting for the impact, both are growing organically. 

Abbott’s capital return program includes dividends and repurchases. The repurchases aren’t robust but sufficient to offset dilution; the dividend is what counts. Abbott’s dividend will be worth $2.20 in 2024 and is expected to grow by a low double-digit amount in 2025. The dividend coverage is ample, with the payout ratio below 50% and earnings forecasted to grow. The balance sheet is healthy, with low leverage and sufficient cash and capitalization to sustain pipeline and acquisitional investment. 

Intuitive Surgical Is an Intuitive Buy for Investors

Intuitive Surgical NASDAQ: ISRG is the leading pure-play on MedTech. The company’s results show that its da Vinci surgical robots lead the field. The Q3 results were head-&-shoulders above the competition, with a 17% increase in revenue driven by strong tailwinds. The tailwinds include an expanding installed base of da Vinci platforms, widening approval, and growing comps. Comps are driven by the expanded base, increased approvals, and deepening penetration of services, which are expected to continue for many years. The surgical systems simplify surgeries and open the door to new applications, including AI assistance and procedures performed from remote locations. 

Intuitive Surgical does not return capital to shareholders; instead, it chooses to reinvest in the business and provide value with growth. The critical details are in the balance sheet, which 2024 shows increasing cash, increased assets in all categories, steady liability, ultra-low leverage, and a 17% increase in shareholder equity. Analysts' trends in 2024 are also positive, with sentiment pegged at Moderate Buy and the price target increasing. The consensus reported by MarketBeat.com is up 50% YoY in late October, up 15% since the Q3 report was released, with revisions leading to a new all-time high in the $550 to $600 range. 

UnitedHealth Group Grows Despite Headwinds

UnitedHealth Group NYSE: UNH has headwinds, including the cyber attack in Q1 and higher YoY medical costs for its insurance business. However, despite those factors, the company is sustaining growth, supported by an increasing client base and volume.

The critical takeaways from 2024 are the increased leverage and operational quality, which will sustain robust cash flow and a healthy capital return. The capital return includes dividends and repurchases, and the dividend, at least, is growing annually. The dividend is worth $8.40 in 2024, is reliable at less than 30% of earnings, and comes with a mid-teens CAGR. The repurchases reduced the count by 0.1% YTD at the end of Q3 and will continue to offset dilution in 2025.