Meet the “Magnificent Seven” of healthcare stocks

The original “Magnificent Seven” is a group of technology stocks that have typically delivered the market’s best returns over the past decade. Creating similarly prominent groups in other fields, such as medicine, is not an exact science. So some people may disagree with the list below. But the seven healthcare stocks in the industry’s “Magnificent Seven” all share the following characteristics: First, they are all leaders in their respective niches.

Second, they have significantly outperformed the market over the past decade. Third, they all have solid long-term prospects. With that said, here are my Magnificent Seven healthcare stocks: ellie lily (Ellie -0.03%), novo nordisk (NGO 0.27%), Vertex Pharmaceuticals (VRTX 0.17%), AbbVie (ABBV 0.97%), intuitive surgery (ISRG -0.25%), HCA Healthcare (HCA 0.56%)and UnitedHealth Group (UNH 0.32%).

LLY total return level data from YCharts.

Eli Lilly and Novo Nordisk

It makes sense to group these two pharmaceutical giants. Both companies are leaders in the diabetes and obesity care market, where they have competed for decades. Eli Lilly won approval last year for its anti-obesity drug Zepbound, which will generate billions of dollars in revenue. Wegovy, Novo Nordisk’s competitor in this space, is still growing its sales at an impressive rate. Additionally, both pharmaceutical companies have incredibly deep pipelines.

Novo Nordisk is still seeking innovation in the obesity market. A phase 1 study of a promising candidate recently reported positive results. Meanwhile, Eli Lilly received approval for several new products last year. We are awaiting word from U.S. regulators on donanemab, a potential Alzheimer’s disease treatment. Eli Lilly also delivered promising Phase 1 results for a gene therapy that could treat hearing loss.

Both companies should continue to deliver strong financial results and stock market performance. Both stocks are expected to become trillion-dollar stocks within 10 years.

Vertex Pharmaceuticals

Vertex Pharmaceuticals dominates the market for treatments for the rare disease cystic fibrosis (CF). Although highly innovative and continually evolving in this field, biotechnology is now looking to diversify. Reducing exposure to key treatment areas is not a bad idea. Vertex Pharmaceuticals recently received approval for a gene-editing treatment called Casgevy.

We developed this treatment in collaboration with CRISPR therapeutics. Casgevy is a one-time treatment for sickle cell disease and transfusion-dependent beta thalassemia, two rare blood diseases that have been incredibly difficult to treat and manage. This milestone was a significant breakthrough for Vertex, and there are many more developments to come. Pharmaceutical companies are inching closer to launching another CF drug and a new treatment for acute pain.

Vertex also has several major products in the pipeline. Biotech is likely to maintain its momentum for a long time.

AbbVie

AbbVie was spun off in January 2013 and became an independent company. Abbott Laboratories. Since then, the pharmaceutical company has led the market, largely thanks to its superstar immunology drug, Humira. The rheumatoid arthritis drug’s patent exclusivity expired last year, but AbbVie is managing one of the most significant patent cliffs in industry history (Humira is the best-selling drug of all time) quite well.

Sales have been declining since last year, but management expects that to change in 2025. AbbVie’s Skyrizi and Rinvoq are Humira’s successors. It’s difficult to find two drugs that can replace peak annual sales of $21.2 billion, but Skyrizi and Rinvoq will likely exceed that total. Management expects these companies to have combined revenue of $27 billion by 2027.

This speaks volumes about AbbVie’s innovative potential, especially in the field of immunology. The company has other promising products and pipeline candidates and is a Dividend King. Investors, including income seekers, can’t go wrong with this stock.

intuitive surgery

Intuitive Surgical is the company that developed the da Vinci System, a robot-assisted surgery (RAS) device. This medical leader pioneered the use of the RAS machine, which allows surgeons to perform minimally invasive surgeries. Unlike open surgery, doctors do not need to make large incisions to access and obtain a full view of the organ being operated on. The da Vinci system is equipped with a small tool that boasts incredible maneuverability.

Intuitive Surgical had installed 8,606 da Vinci systems as of the end of 2023. As long as demand for these machines grows and the volume of procedures performed using them increases, Intuitive Surgical’s revenue and profits will continue to move in the right direction. Considering the aging population and the fact that only 5% of surgeries can currently be performed robotically, Intuitive Surgical appears to have a long runway for growth.

UnitedHealth Group and HCA Healthcare

UnitedHealth Group and HCA Healthcare are two important players in the U.S. healthcare system. The former is one of the country’s largest health insurers and, through its subsidiary Optum, provides pharmacy management solutions and data and analytics services to other insurers. HCA Healthcare is one of the largest hospital chains in the United States, with facilities located throughout the United States, although it is particularly concentrated in Florida and Texas. Both companies have suffered somewhat from business disruptions and resulting economic challenges during the worst of the pandemic, but their operations remain resilient.

Most pandemic-related problems have disappeared. UnitedHealth Group and HCA Healthcare are moving forward and both will benefit from an aging population. UnitedHealth Group’s Optum will see increased demand for the services it provides as claims grow, and HCA Healthcare’s utilization and care volume will move in the right direction. Simply put, both stocks have plenty of growth fuel left in the tank.