With the S&P 500 having dropped 20% so far this year, it could be a good time to scoop up some bargains in the stock market.
Morningstar has put together a list of the “best stocks to own” in various industries, and the healthcare sector is usually solid.
“Healthcare is a sector that generally holds steady no matter what is happening in the economy,” the research firm says. That’s important, given expectations that the economy will slow and perhaps fall into recession next year.
So how does Morningstar define “best stocks”?
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Wide Moats
It’s companies with wide moats, which means a strong and sustainable edge over their competitors. “We’re confident that they will produce returns that outweigh their costs for the next 20 years or more,” Morningstar says.
“The strength of their competitive advantages is also either steady or increasing, which adds to our confidence in their long-term growth.”
Environmental/social/governance (ESG) factors also play a role. “The best companies have business models that allow them to effectively navigate evolving ESG issues that could materially impact their business,” Morningstar said.
Other metrics are involved, too. “The companies that make our list have predictable cash flows, so our analysts can more accurately estimate how much the businesses are worth,” Morningstar said. “These companies also make smart decisions about how they manage and invest their money.”
Morningstar doesn’t recommend that you buy all these stocks now. About half the ones that made its overall list recently traded above the firm’s fair value estimates.
Just eight of the 19 healthcare stocks cited by Morningstar recently traded beneath their fair value. Here they are.
Roche Holding (RHHBY) , the Swiss drug company.Thermo Fisher Scientific (TMO) – Get Free Report, the scientific equipment company.Sanofi (SNY) – Get Free Report, a France-based pharmaceutical company.Medtronic (MDT) – Get Free Report, the medical device company.Zoetis (ZTS) – Get Free Report, which sells health products for animals.GSK …..
