Best Healthcare Stocks to Buy in 2025

The healthcare sector is broad and includes everything from pharmaceutical companies to medical devices and healthcare service providers. Healthcare stocks also tend to be great defensive plays when the stock market is uncertain. 

According to the American Medical Association, health spending in the United States totaled $4.5 trillion in 2022. This means there’s a significant amount of opportunity. However, so far in 2024 (as of October 18), S&P 500 healthcare stocks have returned 12.22%, significantly lagging the broad S&P 500 return of 22.95%. 

So, this leaves us asking, what are some of the best healthcare stocks to buy? What companies have significant upside potential as we head into 2025? We’ve compiled a list of the top healthcare stocks to add to your portfolio. But before we get to those, let’s quickly look at what exactly healthcare stocks are.

Pro Tip: If you plan to add any of these healthcare stocks to your portfolio, make sure you’re tracking their performance. Ziggma has one of the best portfolio trackers, giving you a complete picture of your investment portfolio. 

What Are Healthcare Stocks?

Healthcare stocks are publicly traded companies in the healthcare industry. They could be a health insurance company, medical technology company, or Pharmaceutical companies.

Best Healthcare Stocks to Buy in 2025

Eli Lilly & Co. (LLY)

Pharmaceutical company Eli Lilly & Co. has seen tremendous success with its diabetes and weight loss drugs, also known as GLP-1. Mounjaro and Zepbound have been two significant drivers of LLY’s success this year. The two combined for $6.7 billion in sales in the first half of 2024, which accounts for approximately 44% of the company’s total revenue.

With the success of these two drugs, the company has committed $18 billion since 2020 to increasing the available supply. This commitment to growth is evident as the company is projecting revenue growth of 35.52% and earnings growth of 130.17% in 2025.  

The biggest downside to Eli Lilly & Co. is the stock isn’t cheap. Currently priced at $906.49, the company trades at a P/E of 68.8. However, even with this, the average analyst price target is $1,021.79, an 11% upside. 

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Merck & Co. Inc. (MRK)

Merck & Co. Inc. has a strong presence in oncology and their fight against cancer, but also vaccines and animal health. This diversification is just one reason why there is a lot to love about the company. In their recent second-quarter results, Merck announced $16.1 billion in revenue, which was a 7% increase year-over-year (YoY). 

A significant part of this success comes from their cancer drug Keytruda, which had sales of $7.3 billion in the quarter, a 21% increase. Merck’s vaccine segment is led by vaccine Gardasil, which had revenue of $2.6 billion in the second quarter. 

Merck will be a great pick if you want to add value to your

. Their current 13.8 P/E ratio is low compared to similar companies. Plus, their effective asset utilization is 35%, one of the industry’s highest. With all of this, it should be no surprise that Merck has earned a 100 Ziggma Stock Score.

Zimmer Biomet Holdings Inc (ZBH)

The next company on our list of healthcare stocks to buy is Zimmer Biomet Holdings. One thing we love about this company is its wide moat in the medical devices industry. Not only does it cost orthopedic surgeons a significant amount of money to switch to different devices, but Zimmer Biomet Holdings’ intellectual property also provides them with a significant advantage in joint reconstruction. 

Currently priced at $104.83, ZBH has a P/E of 13.4x, which is cheap compared to similar companies. They’re also expecting strong earnings per share (EPS) growth of 63.11% next year. The average analyst price target is $123.80, a 16% upside from their current price. If you’re looking to add a medical device company to your portfolio, ZBH would be a great choice.

Amgen Inc (AMGN)

Amgen, a leader in the biotech space, is up 6.94% year-to-date (YTD), which lags the gains of the overall market. Even so, there is a lot to love about Amgen and its portfolio of drugs. Because they have their hand in many different areas, including oncology, cardiology, inflammation, rare diseases, and more, their diversification makes them a safer stock pick.

There is also a lot of excitement beyond the drugs currently on the market. Amgen also has numerous drugs in the pipeline for approval, including MariTide, its GLP-1. Some of the current phase two results are extremely promising compared to the competing GLP-1 products already on the market.

Amgen has strong revenue growth that’s predicted to be 17.78% next year. Combine that with their EPS growth of 56.04%, and there could be a nice amount of upside on the horizon. 

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AbbVie Inc. (ABBV)

Drugmaker AbbVie has made several acquisitions over the years, which have given it a very diverse business. In 2020, it acquired Allergen, a leading Botox company, and late last year, it purchased ImmunoGen and Cerevel Therapeutics. 

With all the acquisitions they’ve made, they have a very diversified revenue stream and significant free cash flow. Free cash flow for the trailing 12 months was $17.78 billion, but this was the first time since 2021 that it had dipped below $20 billion. All this cash on hand allows them to continue making profitable acquisitions and provide shareholders with a 3.38% annual dividend.

With a forward P/E of 17.4x, this could be a great stock to purchase at its current levels. Many analysts would agree because its average price target is $201.56, representing a 7% upside potential.

How We Chose the Best Healthcare Companies

We used Ziggma’s free stock screener and our proprietary stock rankings to choose which healthcare stocks to include in this list. We wanted to find companies with lower P/E ratios and strong revenue and EPS growth.

Types of Healthcare Stocks

Health care companies are a pretty broad sector. Below are some of the different types of health care stocks you could invest in.

Pharmaceutical and Biotech Companies

Pharmaceutical and biotech companies produce most of the drugs available. These could be drugs for weight loss, oncology, Alzheimer’s, or any other condition.

Medical Device Companies

Medical device companies are producers of devices used in procedures. It could be devices used in knee or hip replacements, pacemakers, or a similar device.

Healthcare Facilities

Healthcare facilities are publicly traded hospitals, urgent care centers, surgery centers, and other facilities. One of the biggest is HCA Healthcare, which owns hundreds of urgent care centers, imaging clinics, and surgery centers, as well as more than 200 different hospitals.

Pros and Cons of Investing in Health Care Stocks

Before you invest in healthcare stocks, it’s important to weigh some of the pros and cons.

Pros of Health Care Stocks

• There is a high number of Dividend-Paying Companies: Because many healthcare companies have a significant amount of cash on hand, they’re paying out attractive dividends to their shareholders. The healthcare sector makes up 10.1% of all dividend aristocrats.
• Recession-proof: Many healthcare stocks provide a significant amount of protection during recessions. While no industry is 100% safe from market downturns, people still need medical treatments, and drug development is still moving forward.

Cons of Health Care Stocks

• Regulatory Risk: Certain healthcare sectors, specifically drug makers, face significant regulatory risks. If the FDA does not approve certain drugs, it can have a major impact on the company’s stock price.

The Bottom Line

The healthcare sector is extremely wide, with companies ranging from drug makers to healthcare facilities. Many of these companies can experience significant price fluctuations based on product approval. However, the companies we’ve listed all have a long history of success and are some of the best stocks to invest in. They have a diversified product line and a lot of free cash flow.