Best health care stocks May 2024

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The best health care stocks included above all trade on a major U.S. stock exchange and meet the following criteria:

  • Consensus analyst recommendation of “buy” or better. A high number of analyst “buy” ratings indicates an expectation that the stock will outperform the overall market.
  • Market capitalization of at least $10 billion. If a company has a leading market share and competitive advantages in a sizable industry, it will have a market cap greater than $10 billion. This is particularly true of many stocks related to the health care industry, which have significant capital requirements and long-term goals.
  • An Altimeter overall grade of at least a B. We applied a screen to select the best stocks for this list, considering only stocks rated a B or better by Altimeter. The overall grade considers profitability, earning stability, valuation and earning expectations. Grades of B or higher for both are stocks that are ranked in the top quarter of nearly 5,000 stocks in Altimeter’s stock database. This indicates that these companies have strong valuations with the ability to improve returns.
  • An Altimeter fundamental forensics grade of at least a B. We applied this screen to select the best stocks for this list, considering only stocks rated a B or better based on a forensic accounting score. This grade considers whether the company signals any major flags; a good score indicates a lower risk for accounting anomalies.

Why other stocks didn’t make the cut

The investment landscape, particularly within the realm of health care, is replete with opportunities that may, at first glance, seem lucrative. Yet a measured approach is paramount when selecting stocks, so we have not included smaller companies in our list.

Despite their potential for innovation and disruption, these emerging companies frequently carry heightened risks for investors. Their vulnerability to market fluctuations, their less established track records, and the often unproven nature of their technologies or therapies can lead to unpredictability in their stock performance.

The process of drug development they are engaged in is an arduous journey filled with regulatory hurdles and scientific challenges. This inherent risk factor is exacerbated in the case of smaller firms, which may lack the necessary resources to withstand failure in clinical trials or unexpected roadblocks in the path to commercialization. As a result, while potentially offering high rewards, these smaller companies equally possess high-risk attributes, making them unsuitable for those seeking long-term, consistent returns.