Three stocks to buy for healthy long-term growth
A professional investor tells us where he’d put his money. This week: Ketan Patel, manager of the Amity UK fund at EdenTree Investment Management
The race to develop a commercial vaccine for Covid-19 has brought the healthcare industry into sharp focus. It is a highly diverse and rich area of the market for all types of investors. A growing global population, which is both ageing and ailing, remains a highly supportive long-term backdrop for the sector. The rise of the middle class in emerging markets is another tailwind, with more patients able to afford healthcare. Changes in their dietary habits, meanwhile, will lead to an increase in chronic conditions such as diabetes, autoimmune and cardiovascular diseases.
A sector to suit all investors
The depth and breadth offered by the global healthcare industry is second to none. It includes well-established multinational companies operating in drug research and development, life sciences, diagnostics, distribution, medical technology and animal health. Moreover, the mix of quality, defensive and growth stocks in the healthcare industry should appeal to all types of investors.
The medical-technology subsector contains well-established groups such as Smith & Nephew, which have built high-quality businesses capable of delivering long-term earnings growth. The search for companies that can deliver year on year, so-called compounders, is the Holy Grail for investors with a long-term investment horizon.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
In the mid- and small-cap segments, well-positioned businesses with material exposure to the diagnostics and life sciences sectors include Bioventix, Clinigen, IP Group, Smiths Group, Oxford Instruments and Spectris.
Solid blue-chip income
Meanwhile, the large-cap pharmaceutical research and development (R&D) giants, such as GlaxoSmithKline, have defensive business models with low leverage, high margins, strong cash-flow generation and sustainable income. It is no surprise that this sector has stood up well during the coronavirus pandemic. What’s more, there has not been a dividend cut in this part of the market for more than two decades (excluding mergers and acquisitions). This remains a big draw at a time when the global dividend landscape has been fractured by cuts, suspensions, cancellations and deferrals.
Large-cap growth opportunities
There are also growth opportunities in the large-cap segment, with the likes of AstraZeneca offering highly attractive earnings growth for investors. Long-term investors in AstraZeneca have been well compensated: it has become the most valuable company in the FTSE 100, closely followed by GlaxoSmithKline. Within animal health, a sector forecast to grow by a third to $44bn by 2024, market-leading companies such as Genus and Dechra Pharmaceuticals are set to deliver double-digit earnings growth.
GlaxoSmithKline (LSE: GSK), AstraZeneca (LSE: AZN) and Smith & Nephew (LSE: SN) are global leaders in their areas and have developed business models with low leverage and high margins, which leads to excellent free cash flow over an extended period of time. Driven by long-cycle macro trends, all three firms look set to continue to deliver for long-term investors – regardless of the macroeconomic environment.
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
-
How much gold is in the world?
Have you ever wondered how much gold is in the world and who holds it? We take a look at the top countries with the most gold reserves.
-
UK interest rate cut “seems like a certainty” this week
Markets and economists are confident that the Bank of England will cut interest rates by at least 25 basis points tomorrow, as growth fears ramp up
-
Unilever braces for inflation amid tariff uncertainty – what does it mean for investors?
Consumer-goods giant Unilever has made steady progress simplifying its operations. Will tariffs now cause turbulence?
-
'Technology will determine tomorrow’s top stocks in emerging markets'
Opinion John Citron, investment manager of the JPMorgan Emerging Markets Investment Trust, tells us where he’d put his money
-
Two ways to tap into monopoly profits from airports
Most investors can’t get their hands on airports. Here are two ways you can
-
Three British mid-caps that could make 'attractive' investments
Opinion Charles Luke, manager of the Murray Income Trust, highlights three UK-listed mid-cap companies, as he tells us where he'd put his money
-
Fat profits: should you invest in weight-loss drugs?
The latest weight-loss treatments could transform public health and the world economy. Should you invest?
-
How investors could profit from Ramsden Holdings' four-part growth strategy
Ramsdens Holdings offers a diversified set of financial and retail services and a juicy yield, says Dr Michael Tubbs
-
How to invest in the booming insurance market
The insurance sector is experiencing rapid growth after years of stagnation. Smart investors should buy in now, says Rupert Hargreaves
-
Out of America's shadow: Why Trump's tariff chaos may be good for non-US stocks
Opinion Upending global investment and trade could benefit other countries at the expense of the US market, says Cris Sholto Heaton