2 Top Healthcare Growth Stocks to Buy Right Now

While the first half of 2024 delivered superior gains across the major indexes, some investors may be concerned about recent stock market volatility. There is also uncertainty about the Federal Reserve’s long-anticipated but yet-to-be-implemented interest rate cuts and what they could mean for businesses across all industries. No investor can know what the market will do in the coming months.

However, some industries tend to be more resilient than others during times of economic turbulence, and healthcare is one of them. While no company is immune to rising costs or economic downturns, people need drugs, treatments and other healthcare services regardless of what happens to the stock market or the macroeconomic landscape.

On that note, if you have money to invest now, here are two top healthcare stocks to add to your portfolio.

1. UnitedHealth Group

UnitedHealth Group (UNH -0.52%) is one of the world’s leading healthcare companies by revenue, thanks to a diversified business offering everything from insurance services to specialty pharmacy solutions. The company has recently faced some difficulties following a cyber attack earlier this year that resulted in billions being paid out to affected suppliers.

At the time of the company’s second-quarter earnings report, management said UnitedHealth Group had distributed more than $9 billion in advance funding and interest-free loans to help healthcare providers whose operations were affected by the attack. However, given that the company had about $31 billion on its balance sheet at the end of the second quarter, it was more than capable of meeting those obligations and continuing to pay its long-standing dividend.

UnitedHealth has an enviable history of maintaining and growing its dividend and has increased its payout by approximately 94% in the past five years alone. The stock is yielding about 1.4% at the time of writing, with a forward annual dividend rate of $8.40 per share. The company maintains a reasonable payout ratio of around 51% of earnings.

Right now, the company is facing higher-than-usual costs due to both the financial assistance it provides to providers and increased levels of outpatient care, which are driving up its expenses. Still, in addition to a solid cash position, UnitedHealth Group continues to grow revenue consistently and is typically profitable.

Total revenue rose 6.5% year-over-year in the second quarter to $98.9 billion, while income from operations totaled $7.9 billion. The company generated operating cash flow of $6.7 billion in the period — 1.5 times net income. UnitedHealth also increased its dividend by 12% in Q2, making 2024 its 15th consecutive year of double-digit percentage increases.

UnitedHealth Group looks like a smart way to invest in a storied healthcare business that delivers steady income and is a valuable buying proposition in any type of market.

2. Intuitive surgical

Intuitive surgical (ISRG 1.09%) is a leader in robot-assisted surgery with a portfolio of surgical platforms that are used by healthcare providers around the world. The company’s Da Vinci surgical systems have been used to perform more than 2.2 million minimally invasive procedures in 2023 alone and more than 15 million to date.

Intuitive Surgical recently released the latest generation of its flagship system, the da Vinci 5. Featuring more than 10,000 times the computing power of its predecessors, it uses the power of artificial intelligence and machine learning to improve surgeon accuracy and provide improved patient outcomes.

The da Vinci 5 was approved by the Food and Drug Administration in March. Intuitive Surgical placed a total of 341 da Vinci systems with customers in the second quarter, and 70 of those (about 20 percent of that total) were its latest model. The company grew its total installed base of da Vinci systems to 9,203 during the period, a healthy 14% increase from a year ago.

Revenue in the second quarter totaled $2.01 billion, also up 14% from the corresponding quarter in 2023. Profits accelerated at an even faster rate of 25% to $527 million.

More than 80% of Intuitive Surgical’s revenue comes from recurring revenue rather than one-time sales of its systems. Recurring revenue comes from several sources, including healthcare providers purchasing replacement instruments and accessories for its surgical systems, operating leases and fees attached to multi-year service contracts for those systems.

Leases accounted for 51% of the company’s surgical system placements in the second quarter, a trend that management expects to grow over time. Intuitive Surgical had nearly $5 billion in cash at the end of the quarter. Its history of top and bottom growth revolves around an enviable recurring revenue business that remains a leader in surgical robotics. Investors may want to take a look at picking up some shares of this stock before the end of the summer.