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Here are health-care stocks to watch now, amid a bumpy recovery

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Health care, long an ailing stock market sector, has recovered over the past six months, with currently robust vital signs and strong growth projections.

The recovery comes after the sector failed to make good on positive expectations for 2022 based on estimates of pent-up demand for physician office visits and elective procedures after the pandemic.

Health care was basically flat in 2022 and again for most of 2023, a year when its overall performance was the third-worst among the market’s 11 sectors and the S&P 500 grew 26%.

Why this year may be different

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One factor driving investment is the broadening of market performance from big tech stocks into other sectors. Amid this perennial sector rotation, health-care stocks are a natural place for money to flow now because they’re defensive, having historically done well in slowing and growing economies alike.

This defensive advantage has been drawing investment from institutional investors expecting slowing economic growth at this late stage of the business cycle, as the Federal Reserve estimates growth of 2.5% for the first quarter compared with 3% in 2023.  

Constant demand

Health care is a defensive redoubt for investors because demand isn’t affected by the economy. People will always need health care, and insured people will usually seek it, regardless of what the economy’s doing.

For many individuals, a slowing economy may lead to less job security, prompting them to spend less. This may mean putting off buying a new car or remodeling the kitchen, but not medical care.

Further, demand is unflagging from baby boomers on Medicare, including those with supplemental plans with relatively low deductibles and co-pays.

Also driving the sector has been a shift in investor sentiment, with buzz surrounding new pharmaceuticals, such as GLP-1 drugs for treating diabetes and effecting weight loss, and robotic technology enabling minimally invasive techniques for complex surgeries.

GLP-1 drugs have doubled Eli Lilly’s share price over the past 12 months, bringing its trailing price-earnings, or P/E, ratio for that period to a lofty 129. Over the same period, Intuitive Surgical’s robotic da Vinci Surgical System helped the company grow its stock 42%, bringing its trailing P/E ratio to 75.

Though these two stocks may continue to do well this year, health-care companies that probably have more room to grow, as indicated by their lower valuations, aren’t scarce. They can be found in various subsectors, including biotech, providers/services, equipment/supplies and life science tools/services.

Six stocks to watch

Here are six stocks with attractive valuations, low-risk fundamentals, good earnings and strong growth projections:

  • Abbvie (ABBV). This well-known biotech company has an unusually high dividend yield — currently, 3.83%. Products include drugs for treating psoriatic arthritis, plaque psoriasis, Crohn’s disease, depression and some cancers. Market cap: $286 billion. Trailing 12-month P/E ratio: 16.3.
  • Stryker Corp. (SYK). This medical device company manufactures various implants for spinal conditions and joint replacements for knees, hips and shoulders. Stryker benefits from sustained demand from aging boomers with deteriorating joints. Market cap: $129 billion. Trailing P/E: 33.
  • Medpace Holdings (MEDP). At 43, Medpace’s trailing P/E may seem high, but the share price has risen 63% over the last six months. A contract research organization, Medpace provides client companies with expertise and services to help them shepherd new drugs and medical devices through the different phases of development. Market cap: $12 billion.
  • Iqvia Holdings (IQV). This biotech company operates at the intersection of health care and technology, providing analytics, tech solutions and clinical research services to inform decision-making at hospitals and R&D organizations. P/E: 31. Market cap: $42 billion.
  • Cencora (COR). Though Cencora’s share price has risen more than 27% over the last six months, earnings growth gives this provider of pharmaceutical supply-chain solutions and services for the human and animal markets a relatively low trailing P/E — 26. Market cap: $47 billion.

Since 1952, presidential election years have been consistently positive for the overall market, especially when an incumbent is running. But health-care stocks are sometimes an exception because the sector is a political punching bag for candidates pledging to cut costs for consumers. Stock prices may dip from such rhetoric, creating buying opportunities.

Current projections indicate that investors now buying shares of health-care companies with good fundamentals and strong market positions, and holding them into 2025, may be positioned for strong gains.

— By Dave Sheaff Gilreath, a certified financial planner, and partner/founder and chief investment officer at Sheaff Brock Investment Advisors and its institutional arm, Innovative Portfolios. Sheaff Brock Investment Advisors placed #10 in CNBC’s FA100 rankings.

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How students choose a college

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Is it best to go to college or dive straight into the working world?

Ethan Bianco, 17, waited right up until the May 1 deadline before deciding which college he would attend in the fall.

The senior at Kinder High School for the Performing and Visual Arts in Houston was accepted to several schools, and had whittled down his choices to Vanderbilt University and University of Texas at Austin. Ultimately, the cost was a significant factor in his final decision.

“UT is a much better award package,” he said. In-state tuition for the current academic year is $10,858 to $13,576 a year, which would be largely covered by Bianco’s financial aid offer.

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Vanderbilt, on the other hand, consistently ranks among the best private colleges for financial aid and promises to meet 100% of a family’s demonstrated need.

The school initially offered Bianco $35,000 in aid, he said. With that package, “it would be about $40,000 more for my family to attend Vanderbilt per year.”

However, he successfully appealed his award package and leveraged private scholarships to bring the price down further — and committed to Vanderbilt on National College Decision Day.

How cost plays into college choices

For most graduating high school seniors, the math works out differently. The rising cost of college has resulted in a higher percentage of students enrolling in public schools over private ones, according to Robert Franek, editor-in-chief of The Princeton Review.

“Currently, it is about 73% of the undergraduate population — but this year, with increasing uncertainties about financial aid and changing policies about student loans, it is very likely that number will go up,” Franek said.

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Soaring college costs and looming student debt balances have pushed this trend, and this year, there are added concerns about the economy and dwindling federal loan forgiveness options. As a result, this year’s crop of high school seniors is more likely to choose local and less-expensive public schools rather than private universities far from home, Franek said.

Price is now a bigger consideration among students and parents when choosing a college, other reports also show. Financial concerns govern decision-making for 8 in 10 families, according to one report by education lender Sallie Mae, outweighing even academics when choosing a school

“Choosing a school is a personal and individual decision,” said Chris Ebeling, head of student lending at Citizens Financial Group. Along with academics and extracurriculars, “equally important is the cost,” he said. “That needs to be weighed and considered carefully.”

Carlos Marin, 17, on National College Decision Day.

Courtesy of AT&T

On National College Decision Day, Carlos Marin, a senior at Milby High School, also in Houston, enrolled at the University of Houston-Downtown. Marin, 17, who could be the first person in his family to graduate from college, said he plans to live at home and commute to classes.

“The other schools I got into were farther away but the cost of room and board was really expensive,” Marin said.

College costs keep rising

College costs have risen significantly in recent decades, with tuition increasing 5.6% a year, on average, since 1983 — outpacing inflation and other household expenses, according to a recent report by J.P. Morgan Asset Management.

Deep cuts in state funding for higher education have also contributed to the soaring price tag and pushed more of the costs onto students. Families now shoulder 48% of college expenses, up from 38% a decade ago, J.P. Morgan Asset Management found, with scholarships, grants and loans helping to bridge the gap.

Nearly every year, students and their families have been borrowing more, which boosted total outstanding student debt to where it stands today, at more than $1.6 trillion.

A separate survey by The Princeton Review found that taking on too much debt is the No. 1 worry among all college-bound students.

Incoming Vanderbilt freshman Bianco qualified for a number of additional private scholarships and even received a free laptop from AT&T so that he could submit the Free Application for Federal Student Aid and fill out college applications. He said he is wary of taking out loans to make up for the difference.

“I believe that student loans can be beneficial but there’s also the assumption that you’ll be in debt for a very long time,” Bianco said. “It almost becomes a burden that is too much to bear.”

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Here are the HSA contribution limits for 2026

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The IRS on Thursday unveiled 2026 contribution limits for health savings accounts, or HSAs, which offer triple-tax benefits for medical expenses.

Starting in 2026, the new HSA contribution limit will be $4,400 for self-only health coverage, the IRS announced Thursday. That’s up from $4,300 in 2025, based on inflation adjustments.

Meanwhile, the new limit for savers with family coverage will jump to $8,750, up from $8,550 in 2025, according to the update.   

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To make HSA contributions in 2026, you must have an eligible high-deductible health insurance plan.

For 2026, the IRS defines a high deductible as at least $1,700 for self-only coverage or $3,400 for family plans. Plus, the plan’s cap on yearly out-of-pocket expenses — deductibles, co-payments and other amounts — can’t exceed $8,500 for individual plans or $17,000 for family coverage.

Investors have until the tax deadline to make HSA contributions for the previous year. That means the last chance for 2026 deposits is April 2027.

HSAs have triple-tax benefits

If you’re eligible to make HSA contributions, financial advisors recommend investing the balance for the long-term rather than spending the funds on current-year medical expenses, cash flow permitting.

The reason: “Your health savings account has three tax benefits,” said certified financial planner Dan Galli, owner of Daniel J. Galli & Associates in Norwell, Massachusetts.  

There’s typically an upfront deduction for contributions, your balance grows tax-free and you can withdraw the money any time tax-free for qualified medical expenses. 

Unlike flexible spending accounts, or FSAs, investors can roll HSA balances over from year to year. The account is also portable between jobs, meaning you can keep the money when leaving an employer.

That makes your HSA “very powerful” for future retirement savings, Galli said. 

Healthcare expenses in retirement can be significant. A single 65-year-old retiring in 2024 could expect to spend an average of $165,000 on medical expenses through their golden years, according to Fidelity data. This doesn’t include the cost of long-term care.

Most HSAs used for current expenses 

In 2024, two-thirds of companies offered investment options for HSA contributions, according to a survey released in November by the Plan Sponsor Council of America, which polled more than 500 employers in the summer of 2024. 

But only 18% of participants were investing their HSA balance, down slightly from the previous year, the survey found.

“Ultimately, most participants still are using that HSA for current health-care expenses,” Hattie Greenan, director of research and communications for the Plan Sponsor Council of America, previously told CNBC.

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There’s a higher 401(k) catch-up contribution for some in 2025

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If you’re an older investor and eager to save more for retirement, there’s a big 401(k) change for 2025 that could help boost your portfolio, experts say.

Americans expect they will need $1.26 million to retire comfortably, and more than half expect to outlive their savings, according to a Northwestern Mutual survey, which polled more than 4,600 adults in January.

But starting this year, some older workers can leverage a 401(k) “super funding” opportunity to help them catch up, Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida, previously told CNBC.

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Here’s what investors need to know about this new 401(k) feature for 2025.

Higher ‘catch-up contributions’

For 2025, you can defer up to $23,500 into your 401(k), plus an extra $7,500 if you’re age 50 and older, known as “catch-up contributions.”

Thanks to Secure 2.0, the 401(k) catch-up limit has jumped to $11,250 for workers age 60 to 63 in 2025. That brings the max deferral limit to $34,750 for these investors.   

Here’s the 2025 catch-up limit by age:

  • 50-59: $7,500
  • 60-63: $11,250
  • 64-plus: $7,500

However, 3% of retirement plans haven’t added the feature for 2025, according to Fidelity data. For those plans, catch-up contributions will automatically stop once deferrals reach $7,500, the company told CNBC.

Of course, many workers can’t afford to max out 401(k) employee deferrals or make catch-up contributions, experts say.

For plans offering catch-up contributions, only 15% of employees participated in 2023, according to the latest data from Vanguard’s How America Saves report.

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However, your eligibility for higher 401(k) catch-up contributions hinges what age you’ll be on Dec. 31, Galli explained.

For example, if you’re age 59 early in 2025 and turn 60 in December, you can make the catch-up, he said. Conversely, you can’t make the contribution if you’re 63 now and will be 64 by year-end.   

On top of 401(k) catch-up contributions, big savers could also consider after-tax deferrals, which is another lesser-known feature. But only 22% of employer plans offered the feature in 2023, according to the Vanguard report.

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