The Best Healthcare Stocks to Buy

Healthcare stocks appeal to investors for a few different reasons.

• They are considered defensive, meaning they can hold up better than some other sectors during an economic slowdown.
• Demand for health-related products and services continues to rise as populations age.
• Healthcare companies tend to have high research and development spending, which can generate major improvements in treatment options.

In the year to date, the Morningstar US Healthcare Index fell 4.44%, while the Morningstar US Market Index gained 7.62%.

The 12 Best Healthcare Stocks to Buy Now

These were the most undervalued healthcare stocks that Morningstar’s analysts cover as of May 19, 2026.

1. Zoetis ZTS
2. Veeva Systems VEEV
3. Danaher DHR
4. Philips PHG
5. Zimmer Biomet ZBH
6. Agilent Technologies A
7. GE HealthCare Technologies GEHC
8. Thermo Fisher Scientific TMO
9. Novo Nordisk NVO
10. Bristol-Myers Squibb BMY
11. Roche RHHBY
12. GSK GSK

To come up with our list of the best healthcare stocks to buy now, we screened for:

• Healthcare stocks that are undervalued, as measured by our price/fair value metric.
• Stocks that earn a wide
  Morningstar Economic Moat Rating
  . We think companies with wide economic moat ratings can fight off competitors for at least 20 years.
• Stocks that earn a Low, Medium, High, or Very High
  Morningstar Uncertainty Rating
  , which captures the range of potential outcomes for a company’s fair value.

Here’s a little more about each of the best healthcare stocks to buy, including commentary from the Morningstar analysts who cover each company. All data is as of May 19, 2026.

Zoetis

• Morningstar Price/Fair Value: 0.56
• Morningstar Uncertainty Rating: Medium
• Morningstar Economic Moat Rating: Wide
• Industry: Drug Manufacturers—Specialty and Generic

Drug manufacturer Zoetis is the most affordable stock on our list of the best healthcare stocks to buy. Zoetis sells anti-infectives, vaccines, parasiticides, diagnostics, and other health products for animals. The stock is trading 44% below our fair value estimate of $140 per share.

Zoetis is the undisputed leader in the global animal health industry, and we believe it possesses the widest moat of all the competitors. Zoetis has set itself apart based on the impressive innovation that shows up across its product portfolio, including several drugs for specific pet ailments such as separation anxiety. The firm has also sought to expand its presence into virtually every type of animal-related health market, including aquaculture and pet diagnostics.

The animal health industry had long been largely ignored because these businesses were buried within larger human health companies, but no longer. It has many attractive characteristics, including cash-pay buyers, a fragmented customer base, relatively low development costs, and opportunities to introduce novel therapies. Due to the fragmented and cash-pay customer base, animal drugmakers hold significant pricing power. On the human health side, firms are traditionally at the mercy of payers. Government payers or large managed care firms with pharmacy benefit managers have more power to force generic utilization, squash price increases, and, in extreme cases, extract sizable rebates from drug manufacturers. However, animal health products are purchased by a fragmented group of protein producers, veterinarians, and pet owners, allowing very little bargaining power over the highly concentrated animal health firms.

This industry also benefits from favorable growth tailwinds that should allow Zoetis to increase companion animal revenue at a high single-digit long-term growth rate. Zoetis has benefited from pet owners’ increasingly strong relationships with pets as members of the family, which drastically increases their willingness to pay for expensive treatments. However, heightened competition from Elanco and Merck has entered the picture, which we think can eat into Zoetis’ key parasiticide and dermatology franchises. This puts more pressure on the firm to develop and launch innovative therapies, which has been one of Zoetis’ strengths.

Read more about Zoetis here.

Veeva Systems

• Morningstar Price/Fair Value: 0.57
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: Wide
• Industry: Health Information Services

Veeva is the global leading supplier of cloud-based software solutions for the life sciences industry. Trading 43% below our fair value estimate, Veeva Systems has a wide economic moat rating. We think this stock is worth $287 per share.

Veeva is the leading provider of cloud-based software solutions tailored to the life sciences industry. It provides an ecosystem of products to address the operating challenges and regulatory requirements that companies in the space face. Instead of focusing on a general, one-size-fits-all system, Veeva has created platforms that are purely designed to serve one industry. This vertical focus allows the company to shape its products for its specific customers to fit their specific needs. Veeva is deeply penetrated in its addressable market, and its continuously expanding portfolio of applications presents itself as one of the most attractive offerings in the space.

Veeva operates in two categories: commercial and research and development. Commercial solutions entail vertically integrated customer relationship management, or CRM, services and end-market data and analytics solutions mainly through its CRM and add-ons. Vault CRM is Veeva’s cloud-based customer relationship management platform that markets to pharmaceutical and biotech companies with commercial needs. CRM was originally built on the Salesforce 1 platform, but Veeva announced in late 2022 that it would migrate the product to its own Vault platform. Customer migration began in 2024, and existing users can use CRM on Salesforce’s platform until 2030. At the end of 2025, 10 of the top 20 biopharmas have committed to Vault CRM, and we expect roughly four more wins to come over the next few quarters. We believe the Vault platform is well-developed to easily handle both CRM and R&D applications, and this move away from Salesforce gives the firm the independence to run all its offerings.

R&D solutions horizontally integrate data and content through Veeva Vault. Veeva Vault is Veeva’s content management system that is built on the company’s own platform, and it is the industry’s first tool that offers all applications in a unified and integrated server. It is a suite of applications that aims to help across specific functions (commercial, clinical, regulatory, quality and manufacturing, and safety) within any company that is developing drugs or suppliers to those who are developing drugs.

Read more about Veeva Systems here.

Danaher

• Morningstar Price/Fair Value: 0.62
• Morningstar Uncertainty Rating: Medium
• Morningstar Economic Moat Rating: Wide
• Industry: Diagnostics and Research

Next on our list of the best healthcare stocks to buy is Danaher. In 1984, Danaher’s founders transformed a real estate organization into an industrial-focused manufacturing company. The stock trades at a 38% discount to our fair value estimate of $270 per share.

Through its Danaher Business System, Danaher aims for continuous improvement of its scientific technology portfolio by seeking out attractive markets and then making acquisitions to enter or expand within those fields and also divesting assets that are no longer seen as core, such as the 2023 divestiture of Veralto, its environmental and applied solutions segment. After acquisitions, Danaher aims to accelerate core growth at acquired companies by making research and development and marketing-related investments. It also implements lean manufacturing principles and administrative cost controls to boost operating margins. Overall, we appreciate Danaher’s strategic moves, which have pushed it into attractive end markets with strong growth prospects and sticky, recurring revenue streams.

The company’s acquisition-focused strategy has contributed to its becoming a top-five player in the highly fragmented and relatively stable life sciences and diagnostic tool markets, approximately 20 years after its first acquisition in the space (Radiometer in 2004). Important life sciences and diagnostic acquisitions have included Beckman Coulter, Pall, and Cepheid. In early 2020, Danaher completed its largest acquisition, GE Biopharma, now known as Cytiva, which fills some gaps for Danaher within the biopharmaceutical development and manufacturing tool market. We find the drug manufacturing part of the life sciences market particularly attractive given its strong growth trajectory, high margins, and high switching costs associated with regulatory and reproducibility concerns of end users. Management is adding to its diagnostic tools, too, including the pending acquisition of Masimo and its industry-leading pulse oximetry tools, which is expected to close in late 2026.

Danaher also has a history of pruning its portfolio of businesses. The 2023 divestiture of its environmental and applied solutions group (now called Veralto) is just the latest for the company, which distributed shares in the now publicly traded Fortive Corp (industrials) to shareholders directly in 2016 and in Envista (dental) in 2019. Additional divestitures may be possible in the future as well.

Read more about Danaher here.

Philips

• Morningstar Price/Fair Value: 0.64
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: Wide
• Industry: Medical Devices

Philips is a diversified global healthcare company operating in three segments: diagnosis and treatment, connected care, and personal health. Philips is an affordable healthcare stock, trading at a 36% discount to our fair value estimate of $41 per share. The company earns a wide economic moat rating.

Philips is one of the leaders in imaging and image-guided therapies. But the company’s track record is checkered, with multiple self-induced missteps tarnishing its reputation and investor confidence. We believe the resolution of sleep care problems, focusing on its high-performing areas, and a new management team should be able to change the narrative, but uncertainty remains.

Philips’ diagnosis and treatment segment, composed of imaging, ultrasound, and image-guided therapy lines, is a member of the Big Three, along with Healthineers and GE HealthCare. Philips lacks the overall scale and footprint of its larger peers in diagnostic imaging, but has a strong presence in several modalities and the product portfolio breadth that allows it to compete effectively. In imaging areas, such as cardiovascular IGT, cardiac ultrasound, and monitoring, Philips is the industry leader and should capitalize on many favorable trends in the industry. We expect global demand for imaging equipment and services to grow in midsingle digits over the next decade, driven by the demographic shifts, expanding healthcare access, and penetration of new customer channels. All three main industry participants stand to benefit from total addressable market growth and also a greater share at the expense of smaller and more niche providers.

However, Philips’ performance has been problematic for several years, punctuated by the massive and prolonged struggles in sleep care. Litigation resolution in 2024 is an important step in rebuilding sleep care, but the pathway and the ability for Philips to claw back its market position remain highly uncertain.

Emphasis on profitability is key. The company’s operating margins were decimated by the sleep care issues, but also by significant component sourcing challenges and margin compression in imaging. Currently, Philips materially lags its imaging peers on profitability, and we don’t expect this gap to close soon. However, we do believe that the margins have bottomed and should improve. But Philips has a long way to go to restore investor trust.

Read more about Philips here.

Zimmer Biomet

• Morningstar Price/Fair Value: 0.66
• Morningstar Uncertainty Rating: Medium
• Morningstar Economic Moat Rating: Wide
• Industry: Medical Devices

Zimmer Biomet designs, manufactures, and markets orthopedic reconstructive implants as well as supplies and surgical equipment for orthopedic surgery. Zimmer Biomet is an affordable healthcare stock, trading at a 34% discount to our fair value estimate of $130 per share. The company earns a wide economic moat rating.

Zimmer Biomet is the market leader in large-joint reconstruction, and we expect aging baby boomers and improving technology suitable for younger patients to fuel solid demand for hip and knee replacement that should offset price declines. Zimmer stumbled into a series of pitfalls in 2016-17, including integration issues, supply and inventory challenges, and quality concerns. The firm’s efforts to turn itself around have been admirable, though the pandemic slowed progress. Despite all the improvements, the firm still hasn’t reached consistent growth and profitability gains.

Zimmer’s strategy is two-pronged. First, it focuses on cultivating close relationships with orthopedic surgeons who make the brand choice. High switching costs and high-touch service keep the surgeons closely tied to their primary vendor. This tight relationship and vendor loyalty also help explain why market share shifts in orthopedic implants are glacial, at best. As long as Zimmer can launch comparable technology within a few years of its rivals, it can remain in a strong competitive position. Nevertheless, we think surgeon influence will inevitably erode, as the practice of medicine changes in response to healthcare reform. Over the long term, it will be more difficult for surgeons to run private practices profitably, and more of them will be open to employment at hospitals.

Second, the firm aims to accelerate growth through innovative products and improved execution. The latter is critical, in our view, to realizing the firm’s potential. Despite a range of structural competitive advantages, Zimmer Biomet failed to shine in operations from 2016 to 2018, which dragged down returns. Former CEO Bryan Hanson delivered substantial signs of progress. Now, current CEO Ivan Tornos must continue the progress on robotic technology placements (especially in outpatient settings), related consumable product pull-through, and expansion of the firm’s digital portfolio. Additionally, we anticipate the firm will flex its advantage in key areas, including extremities, trauma, and collaborations that involve sensor and digital technologies to improve surgical workflow.

Read more about Zimmer Biomet here.

Agilent Technologies

• Morningstar Price/Fair Value: 0.70
• Morningstar Uncertainty Rating: Medium
• Morningstar Economic Moat Rating: Wide
• Industry: Diagnostics and Research

Originally spun out of Hewlett-Packard in 1999, Agilent has evolved into a leading life science and diagnostic firm. Agilent Technologies is an affordable healthcare stock, trading at a 30% discount to our fair value estimate of $159 per share. The company earns a wide economic moat rating.

Agilent provides tools to analyze the structural properties of various chemicals, molecules, and cells. The company is one of the leading providers of chromatography and mass spectrometry tools, which have applications in a variety of end markets, including the healthcare, chemical, food, and environmental fields. While healthcare-related applications, including clinical diagnostics, remain Agilent’s largest end market, the company generates about half of its sales from nonhealthcare fields, too.

Agilent’s strategy revolves around placing analytical instruments and informatics with relevant customers and then providing related services and consumables such as chromatography columns and sample preparation tools, which account for the rest of Agilent’s sales. About half of Agilent’s sales recur naturally. However, even instrument sales can be relatively sticky at the end of the instrument’s life cycle, especially in the highly regulated biopharmaceutical end market (over 35% of Agilent’s sales) and some of its other applications, where intensive, time-consuming training is required to master the scientific analysis. Agilent aims to increase its exposure to these sticky customer relationships.

Overall, we think top-tier positions in most end markets, innovation, and marketing operations should help Agilent grow revenue in the midsingle digits compounded annually and boost margins overall during our five-year forecast period. On the bottom line, after another challenging year in fiscal 2025 and additional pressures in fiscal 2026, including a rising tax rate, we expect earnings growth to accelerate in the long run, helped by mix benefits, other cost controls, and some share repurchases. While internal growth opportunities look solid, acquisitions could add to its growth prospects, as well.

Read more about Agilent Technologies here.

GE HealthCare Technologies

• Morningstar Price/Fair Value: 0.70
• Morningstar Uncertainty Rating: Medium
• Morningstar Economic Moat Rating: Wide
• Industry: Medical Devices

GE HealthCare Technologies is a medical technology firm with a leading market share in imaging and ultrasound equipment. GE HealthCare Technologies is an affordable healthcare stock, trading at a 30% discount to our fair value estimate of $88 per share. The company earns a wide economic moat rating.

Wide-moat GE HealthCare is a top-three global leader in the medical imaging market. It has a firmly established footprint in hospitals and health networks around the world, and it is positioned to benefit from long-term healthcare trends, including aging populations, the growing demand for early detection and monitoring of cancer and other diseases, and increasing utilization of minimally invasive and noninvasive procedures.

The medical imaging industry is a somewhat consolidated oligopoly, with the top three players—GEHC, Siemens Healthineers, and Philips—controlling about 70% of the market. They largely compete by improving their technology and features rather than outright price competition. Like its peers, GEHC has invested heavily over many decades to build a comprehensive product portfolio and extensive 24-hour servicing networks, which are crucial for selling to big hospitals and health networks. Its large installed base also facilitates sales of software platforms and multiyear servicing contracts that further deepen GEHC’s integration into healthcare providers’ workflows. Unlike its peers, GEHC is also a major player in the pharmaceutical diagnostics market, which has attractive returns and potential upside with respect to the fast-growing theranostics market.

Although smaller players can compete in specific technologies or geographies, we think it would take a very long time for a newcomer to build the portfolio breadth, servicing networks, reputation, and large installed base necessary to compete with the top three players.

GEHC was spun out from General Electric in January 2023. Since then, management has committed to higher ongoing spending on research and development. We think this is an important measure to keep pace with peers. Examples of recent developments include the integration of artificial intelligence into imaging workflows, the launch of photon-counting computed tomography, the recent approval of Alzheimer’s disease drugs, which could substantially increase demand for magnetic resonance procedures, and the adoption of 3D mammography.

Read more about GE HealthCare Technologies here.

Thermo Fisher Scientific

• Morningstar Price/Fair Value: 0.80
• Morningstar Uncertainty Rating: Medium
• Morningstar Economic Moat Rating: Wide
• Industry: Diagnostics and Research

Thermo Fisher Scientific sells scientific instruments and laboratory equipment, diagnostics consumables, and life science reagents. Trading 20% below our fair value estimate, Thermo Fisher Scientific has a wide moat rating. We think this stock is worth $560 per share.

While Thermo Fisher is weathering the pullback in global biopharmaceutical spending and China softness better than most of its peers, it is still not immune to the overall softness in the life science market. Having an unmatched portfolio of products, resources, and manufacturing capabilities has allowed the firm to retain and grow its wallet share among its customers across all channels. We expect the current budget-constrained environment to stay suppressed throughout 2026. But long-term dynamics are still largely intact, and we see Thermo Fisher in a great position to leverage its share gains in the biopharma channel to capitalize on the eventual return of demand.

While bigger is not always better, Thermo Fisher had long committed itself to accumulating as robust a product offering, under one roof, as possible. To reach its ultimate goal of being a one-stop shop and go-to provider of life science instruments and consumables, the company has spent aggressively throughout the years on internal efforts, but particularly on acquisitions. More than $50 billion has been deployed since 2010 on this strategy (including the recent PPD acquisition), which, while accretive to the company’s reach, scale, and product breadth, has historically suppressed its returns on invested capital to rather modest levels. The company’s capital allocation strategy remains a concern for investors.

We anticipate the firm’s penetration of all its customer channels to grow, aided by its expansion into contract research and manufacturing. We also think the company’s global reach will continue to resonate, and its already strong presence within emerging markets should expand further. However, most of the future growth will be contingent on the health of the end markets, and operating discipline is increasingly important as growth opportunities decelerate.

Read more about Thermo Fisher Scientific here.

Novo Nordisk

• Morningstar Price/Fair Value: 0.82
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: Wide
• Industry: Drug Manufacturers—General

With roughly one-third of the global branded diabetes treatment market, Novo Nordisk is the leading provider of diabetes care products in the world. The firm earns a wide economic moat rating, and the shares of its stock look 18% undervalued relative to our $54 fair value estimate.

A pioneer in diabetes care, Novo Nordisk has been in the business for over 85 years. It claims 30% of the $100 billion diabetes treatment market and roughly half of the more than $15 billion insulin market. Diabetes’ prevalence is expected to soar in the coming decades as a result of an increasingly overweight and aging population, and we expect Novo to maintain its wide moat as it continues to innovate in both diabetes and obesity therapies.

Insulin need will grow as more patients are diagnosed with and treated for diabetes, and as patients require more-intense regimens as their disease progresses. Demographic trends are strengthened by a market shift from human insulin toward modern insulin analogs (Novo’s Levemir and NovoLog), next-generation insulin analogs (Tresiba, Fiasp), and a novel weekly insulin, which offer improved efficacy, safety, and convenience for patients. However, pricing pressure is intense in the US (due to pressure from pharmacy benefit managers and biosimilar usage) and China (due to volume-based procurement). In addition, delayed insulin treatments due to the success of GLP-1 therapy are creating a temporary volume headwind.

Novo’s diabetes growth is largely coming from GLP-1 therapies, which include daily Victoza, weekly Ozempic, and daily oral Rybelsus. Strong efficacy and cardiovascular benefits should allow Novo to continue growing sales of GLP-1 therapies in diabetes. Ozempic and Rybelsus helped Novo gain share over Eli Lilly’s once-weekly Trulicity and support growth. However, Eli Lilly is again gaining share with the novel drug Mounjaro.

Semaglutide’s potential in new indications and Novo’s pipeline also give us confidence in Novo’s wide moat. Approved as Wegovy for obesity in June 2021, semaglutide is gaining approval for new indications, such as fatty liver disease. Novo is also testing new amylin combination regimens; while cagrisema’s efficacy doesn’t look differentiating, zenagamtide has generated very strong efficacy in midstage studies and is entering phase 3 in 2026.

Read more about Novo Nordisk here.

Bristol-Myers Squibb

• Morningstar Price/Fair Value: 0.83
• Morningstar Uncertainty Rating: Medium
• Morningstar Economic Moat Rating: Wide
• Industry: Drug Manufacturers—General

Bristol-Myers Squibb discovers, develops, and markets drugs for various therapeutic areas, such as cardiovascular, cancer, and immune disorders. Trading 17% below our fair value estimate, the company has a wide economic moat rating. We think this stock is worth $70 per share.

Adept at partnerships and acquisitions, Bristol-Myers Squibb has built a strong portfolio of drugs and a robust pipeline. This strategy is evident in the acquisition of Celgene, which netted the firm an excellent pipeline and a strong foothold in blood cancer. More recent acquisitions—oncology firms Mirati and RayzeBio and neurology firm Karuna—also help support Bristol’s strong overall pipeline and wide moat.

The acquisition of Medarex in 2009 helped secure Bristol’s strong first-mover advantage in cancer immunotherapy, bringing rights to novel antibodies against PD-1 (Opdivo) and CTLA-4 (Yervoy) used in melanoma as well as other cancers, including lung and kidney cancers. A newer combination drug, Opdualag, is also approved in melanoma, with ongoing trials in lung cancer. Competition from Merck’s market-leading PD-1 inhibitor Keytruda and a 2028 US patent expiration for Opdivo are clear headwinds. However, recently approved subcutaneous Opdivo Qvantig will help slow sales declines, buying time for Bristol’s pipeline to advance. BioNTech-partnered pipeline program pumitamig is in phase 3 testing in certain forms of breast and lung cancers and could be an early mover among new, bispecific immunotherapy drugs.

Bristol is aggressively repositioning itself to expand through challenging patent losses for drugs representing the majority of its sales. These include cancer drugs Revlimid and Pomalyst by 2026 and cardiovascular drug Eliquis (marketed with Pfizer) in 2028. The 2019 Celgene acquisition moved Bristol deeper into blood-related disease, which tends to be an area with strong drug pricing power and should help the company at a time when governments and private payers are pushing back on drug prices. Blood cancer cell therapy Breyanzi and anemia drug Reblozyl have secured leading positions in the US market, and pipeline drugs iberdomide and mezigdomide are in phase 3 trials. The 2020 MyoKardia acquisition (cardiology drug Camzyos) and 2024 Karuna acquisition (schizophrenia drug Cobenfy) are poised to each generate multibillion-dollar annual sales. We are monitoring data updates in 2026 that could expand labels or help secure new launches.

Read more about Bristol-Myers Squibb here.

Roche

• Morningstar Price/Fair Value: 0.86
• Morningstar Uncertainty Rating: Low
• Morningstar Economic Moat Rating: Wide
• Industry: Drug Manufacturers—General

Roche is a Swiss biopharmaceutical and diagnostic company. Trading 14% below our fair value estimate of $60 per share, Roche has a wide economic moat rating.

We think Roche’s drug portfolio and industry-leading diagnostics conspire to create maintainable competitive advantages. As the market leader in both biotech and diagnostics, this Swiss healthcare giant is in a unique position to guide global healthcare into a safer, more personalized, and more cost-effective endeavor. Strong information sharing continues between Genentech and Roche researchers, boosting research and development productivity and personalized medicine offerings that take advantage of Roche’s diagnostic expertise and artificial intelligence leadership.

Roche’s biologics focus and innovative pipeline are key to the firm’s ability to maintain its wide moat and continue to achieve growth as current blockbusters face competition. Blockbuster cancer biologics Avastin, Rituxan, and Herceptin are seeing strong headwinds from biosimilars. However, Roche’s biologics focus (more than 80% of pharmaceutical sales) provides some buffer against the traditional intense declines from small-molecule generic competition. With the launch of Perjeta in 2012, Kadcyla in 2013, and Phesgo (a subcutaneous coformulation of Herceptin and Perjeta) in 2020, Roche has somewhat refreshed its breast cancer franchise. Gazyva, approved in blood cancers and expanding into immunology settings like lupus, as well as new bispecific antibodies Columvi and Lunsumio, will also extend the longevity of the Rituxan blood cancer franchise. Roche has also expanded outside of oncology with MS drug Ocrevus (more than $10 billion peak sales) and hemophilia drug Hemlibra ($5 billion peak sales), with novel pipeline therapies in MS (fenebrutinib) and hemophilia (NXT007) approaching the market. Business development deals have brought rights to promising programs in immunology (Televant’s TL1A) and cardiometabolic (Carmot and Zealand).

Roche’s diagnostics business is also strong. With a 20% share of the global in vitro diagnostics market, Roche holds the number-one rank in this industry over competitors Siemens, Abbott, and Ortho. Pricing pressure has been intense in the diabetes-care market, but new instruments and immunoassays have buoyed the core professional diagnostics segment.

Read more about Roche here.

GSK

• Morningstar Price/Fair Value: 0.88
• Morningstar Uncertainty Rating: Medium
• Morningstar Economic Moat Rating: Wide
• Industry: Drug Manufacturers—General

Drug manufacturer GSK rounds out our list of best healthcare stocks to buy. In the pharmaceutical industry, GSK ranks as one of the largest firms by total sales. The stock is 12% undervalued relative to our fair value estimate of $58 per share.

As one of the largest pharmaceutical and vaccine companies, GSK has used its vast resources to create the next generation of healthcare treatments. The company’s innovative new product lineup and expansive list of patent-protected drugs create a wide economic moat, in our opinion.

The magnitude of GSK’s reach is evidenced by a product portfolio that spans several therapeutic classes. The diverse platform insulates the company from problems with any single product. Additionally, the company has developed next-generation drugs in respiratory and HIV areas that should help mitigate both branded and generic competition. We expect GSK to be a major competitor in respiratory, HIV, and vaccines over the next decade.

On the pipeline front, GSK has shifted from its historical strategy of targeting slight enhancements toward true innovation. Also, it is focusing more on oncology and immunology, with genetic data to help develop the next generation of drugs. The benefits of these strategies are showing up in GSK’s pipeline and new drug launches. We expect this focus to improve approval rates and pricing power. In contrast to respiratory drugs, treatments for cancer indications carry much stronger pricing power with payers.

We think GSK’s decision to divest the consumer business is likely to unlock value over the long run. GSK divested Haleon, its consumer group, in July 2022. Given the strong valuations of consumer healthcare companies, we expect this unit to yield a stronger valuation than what was implied within the company’s structure before the divestment.

Read more about GSK here.

How to Find More of the Best Healthcare Stocks to Buy

Investors who’d like to extend their search for top healthcare stocks can do the following:

• Review Morningstar’s comprehensive list of healthcare stocks to investigate further.
• Stay up to date on the healthcare sector’s performance, key earnings reports, and more with Morningstar’s healthcare sector page.
• Read Morningstar’s Guide to Stock Investing to learn how our approach to investing can inform your stock-picking process.
• Use the Morningstar Investor screener to build a shortlist of healthcare stocks to research and watch.