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AnalysisU.S.

4 healthcare stocks to hedge against recession

The healthcare industry is one of the few sectors usually unaffected by economic recessions. While other sectors may experience sharp declines in business activities, healthcare stocks are often more resilient to economic downturns and can perform well during a recession. This is due to the fact that many people rely on healthcare services regardless of their economic situation, allowing the healthcare industry to have a high degree of price inelasticity.

Price inelasticity means that consumers will continue to purchase healthcare services even when their income decreases and shifts in healthcare costs have little effect on demand for medical services. Furthermore, governments often increase funding for health-related initiatives during financial hardship. Healthcare stocks can offer investors stability and growth potential, making them an excellent choice for weathering future economic storms.

Recent findings by Janus Henderson Investors have shown that healthcare stock declines were 51% less during market downturns than those seen in a broader benchmark such as the MSCI world index. This has highlighted the importance of investors considering healthcare stocks as part of their long-term portfolio strategy.

Here are four healthcare stocks to hedge against recessions:

1. Johnson & Johnson

Johnson & Johnson is one of the world’s largest healthcare companies. Established in 1886, they have provided consumers with quality healthcare products over the past century. Today, the company has grown to become a global leader in its Consumer segment (such as baby care items), Pharmaceutical segment (prescription medicines) and Medical Devices segment (including surgical equipment).

Johnson & Johnson owns many popular household brands, including Tylenol, Listerine, Neutrogena, Aveeno and Nicorette, among many others. Johnson & Johnson operates throughout more than 175 companies worldwide, with total sales exceeding $18 billion annually.

Source: Johnson & Johnson

As a global leader in the healthcare market, many consumers have come to rely on them for their medicinal products. As the global economy enters a period of recession, it is expected that Johnson & Johnson will continue to do well with it their extensive selection of products of reliable products at attractive price points designed to appeal to customers across all income levels. This combination of affordability and quality has become one of the company’s hallmarks, allowing them to remain strong even when other businesses may be struggling financially.

2. Becton, Dickinson and Company

Becton, Dickinson and Company (BD) is a global medical technology company founded in 1897. The company is one of the most extensive medical supplies, laboratory equipment and diagnostic systems manufacturers in the world. BD’s portfolio includes innovative products and services that enable healthcare professionals to reduce costs while providing better patient outcomes. Its products are used in hospitals, physician offices, clinical labs and research facilities worldwide. BD’s products range from syringes to intravenous solutions, insulin delivery systems, and diagnostics instruments and software. These solutions are used by hospitals and clinical laboratories worldwide to detect diseases such as cancer or cardiac conditions earlier to provide more effective treatments with improved outcomes.

BD has had a successful track record throughout the past recession and continues to thrive in today’s economy. Despite economic hardship for many companies during the Global Financial Crisis, BD maintained its financial stability and growth. This is primarily due to its ability to remain focused on providing cost-efficient products that meet customers’ needs while staying true to its mission of advancing healthcare through improved diagnostics, life sciences research, drug delivery systems and more. In addition, careful inventory management has enabled them to continue offering products at a competitive price while achieving profitability goals.

3. AbbVie

AbbVie is a global biopharmaceutical company established in 2013 following the separation of Abbott Laboratories. The company’s headquarters are based in North Chicago, Illinois, with over 50,000 employees across 170 countries. AbbVie specialises in researching, developing and commercialising various advanced therapies to treat severe illnesses, from cancer to autoimmune conditions. Since its 2013 spinoff from Abbott Laboratories, AbbVie has enjoyed consistent financial growth through its focus on innovation and cutting-edge technology. AbbVie has also built a strong reputation for providing high-quality medicines at competitive prices.

With a robust portfolio of blockbuster drugs, including Humira and Imbruvica, and a broad range of upcoming pipeline of treatments for immunology, oncology and neuroscience, the company is likely to remain resilient despite a recession. 

4.IDEXX Laboratories

IDEXX Laboratories is a global leader in animal healthcare and diagnostic technologies, offering a wide range of innovative products and services to veterinarians, livestock producers, pet owners, and public health authorities worldwide. Founded in 1983, Idexx has grown from a small Maine company into an international powerhouse with more than 9,000 employees.

The company’s core businesses focus on developing technologies that empower veterinarians to provide the best care possible for their patients. Products include diagnostics tests used to detect diseases in companion animals; laboratory instruments that analyse samples quickly and accurately; food safety testing equipment; and veterinary practice management software. These products help veterinarians diagnose conditions rapidly and effectively while also helping them manage their practices more efficiently. In addition to these core offerings, IDEXX provides consulting services to ensure customers get the most out of their investments.

Source: IDEXX Laboratories

The company has been growing steadily for many years, even through the 2008-2009 financial crisis. It has achieved this growth by investing heavily in its research and development programs and expanding into new markets. Its products remain in demand as pet healthcare spending is increasing yearly. Additionally, IDEXX’s management team is filled with experienced professionals who have consistently demonstrated their ability to identify and capitalise on growth opportunities in this sector.

As an industry leader in veterinary diagnostics, IDEXX has seen its stock prices rise significantly over the past few years as an industry leader in veterinary diagnostics. The company’s high valuation hasn’t made it an accessible investment for many, but that may be changing. Recently, IDEXX’s share price has come down, providing new investors an attractive entry point into the stock.

The fifth perspective

The current downturn has left many investors wondering what stocks to buy to weather the storm. Healthcare stocks have emerged as a good hedge against recession, providing a haven for those seeking more stability and lower volatility from their investments.

Healthcare stocks have traditionally been less volatile than other sectors, making them attractive to investors looking for steady growth and consistent investment returns. Since healthcare is a necessity for consumers (and their pets) regardless of economic conditions, demand for healthcare products likely remains constant even when other industries may be struggling due to reduced consumer spending. Overall, healthcare stocks offer an attractive option for investors looking to protect their portfolios from losses due to recessions or other macroeconomic shocks.

Wang Choon Leo, CFA

Choon Leo is a growth-focused investor with an interest in innovative platform businesses that can connect users and fix market inefficiencies. He believes that companies with the most competitive business models will compound in value over the long term. Choon Leo is a CFA charterholder.

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