Healthcare Stocks Rebound: Expert Insights on Sector Growth

The healthcare sector has struggled due to US tariff and funding policies, but investor sentiment may be shifting as the sector looks to capitalize on new growth opportunities. Vice President of Portfolio Research at TD Asset Management, Jacky He, discusses the potential for a rally in healthcare stocks.

The healthcare sector has faced significant challenges in recent years due to U.S. tariff and funding policies, leading to a decline in investor sentiment. However, recent developments and strategic moves by key players in the sector suggest that a rally may be on the horizon. Jacky He, Vice President of Portfolio Research at TD Asset Management, discusses the potential for a turnaround in healthcare stocks.

Eli Lilly and Alcon Inc. stand out as notable examples of companies navigating these challenges and positioning themselves for growth. Eli Lilly's Q4 2024 results highlighted strong performance, with a 45% revenue surge to $13.53 billion, driven by blockbuster drugs like Mounjaro and Zepbound in the diabetes/obesity markets [1]. Despite U.S. pricing pressures, international markets offset this with a 55% revenue jump, underscoring the company's global scalability [1].

Alcon Inc., on the other hand, faced a more nuanced situation in Q1 2025, with net sales holding steady at $2.45 billion. While the Vision Care segment outperformed, the Surgical segment struggled with currency fluctuations and soft demand for legacy equipment [1]. Despite these challenges, Alcon's strategic acquisitions, such as the $578 million purchase of Aurion Biotech and Cylite Pty Ltd., aim to bolster its Surgical segment [1].

UnitedHealth Group, another key player in the sector, has seen a significant sell-off this year, with shares down 40% and trading at a 13.2 times earnings multiple, near its lowest in five years [2]. Despite operational setbacks, the company remains a financially sound business, generating tens of billions in free cash flow annually. Michael Burry, known for his prescient call on the housing collapse of 2008, has initiated a stake in UnitedHealth, signaling his belief in the company's potential for a rebound [2].

The potential rally in healthcare stocks is driven by several factors, including the sector's resilience, strategic acquisitions, and regulatory breakthroughs. Eli Lilly's strong revenue growth and global scalability position it as a standout for long-term growth. Alcon, while facing challenges in its Surgical segment, remains a solid performer in vision care. UnitedHealth Group, despite operational turbulence, remains a fundamentally strong enterprise with a durable business model.

Investors should remain cautious but optimistic about the healthcare sector. The sector's momentum in 2025 is being driven by companies that balance innovation with geographic resilience. For long-term investors, companies like Eli Lilly and UnitedHealth Group offer compelling opportunities with strong fundamentals and potential for growth. However, it is essential to conduct thorough due diligence and consider the specific risks and challenges each company faces.

References:

[1] https://www.ainvest.com/news/healthcare-sector-momentum-uncovering-undervalued-opportunities-eli-lilly-alcon-2508/
[2] https://finance.yahoo.com/news/big-short-investor-michael-burry-100000095.html