What are health care stocks?
Health care stocks are shares of publicly traded companies that offer products and services in the medical industry. Health care stocks include things like hospitals and other medical properties, biotechnology companies, medical equipment companies and insurance companies.
9 best health care stocks by one-year performance
Below is a list of nine of the best-performing health care stocks in the S&P 500, ordered by one-year performance.
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The best-performing S&P 500 biotech stock by one-year return is Moderna Inc (MRNA), which is up 142.46%. |
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Ticker |
Company |
Performance (Year) |
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MRNA |
Moderna Inc |
142.46% |
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INCY |
Incyte Corp |
66.52% |
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TECH |
Bio-Techne Corp |
35.98% |
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REGN |
Regeneron Pharmaceuticals Inc |
17.95% |
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VRTX |
Vertex Pharmaceuticals Inc |
10.31% |
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Source: Finviz. Data is current as of July 1, 2026, and is intended for informational purposes only. |
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Brokerage firms |
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on Charles Schwab’s website |
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Types of health care stocks
Health care stocks can be broken down into a few different industries.
Health care facilities and operators
When most people hear the term “health care,” the first thing that comes to mind is often a hospital. And some health care stocks are companies that own or operate hospitals, other health care facilities and provider organizations.
Others, such as Tenet Healthcare, are operators that hire and manage doctors, nurses and technicians to provide health care services to patients.
Biotechnology and pharmaceuticals
The biotechnology and pharmaceutical industries produce drugs.
Technically, biotechnology and pharmaceuticals are different things — pharmaceuticals are made from chemicals, while biotechnology is made from living organisms. But in an investing context, “biotech” and “pharma” are used more or less interchangeably.
Medical equipment companies produce non-drug health care products. This industry can further be broken down into medical supply companies and medical device companies.
Medical supply companies, such as Patterson Companies, produce and distribute basic products used in day-to-day hospital work, including latex gloves and antimicrobial cleaning supplies.
Medical device companies, such as Medtronic, design and manufacture devices used to treat specific health issues, including pacemakers and ventilators.
Health insurance and pharmacy benefit management
Health insurers and pharmacy benefit managers are sometimes collectively referred to as “payers,” since their role is to arrange payment for health care services.
Most people are probably familiar with health insurance companies such as UnitedHealth Group. After all, the majority of Americans have private health insurance, which involves paying premiums to an insurer in exchange for coverage of most health care services.
Pharmacy benefit managers like Express Scripts coordinate between insurers, drug companies and health care providers to deliver medications to patients at the lowest price possible (while still making a profit).
Pros and cons of investing in health care stocks
Many health care stocks offer investors stability and profitability in both good times and bad. But the sector is not without its risks — particularly when the government is involved.
Pros of health care stocks
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Recession resistance: No sector is fully recession-proof, but health care tends to hold up better than most during economic downturns. A 2021 paper from the National Bureau of Economic Research found that health care hiring holds steady during recessions, and sometimes even increases.
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Dividends: Health care providers, insurers and established biotech, pharmaceutical and medical equipment companies often have substantial cash flows from which they can pay dividends. About 10% of the dividend aristocrats — S&P 500 stocks that have increased their payouts annually for at least 25 years — are health care companies.
Cons of health care stocks
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Political risk: Universal health care has been a major topic of discussion in the last few elections, and some proposed reforms could reshape the sector in ways that might hurt investors, for better or worse.
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Regulatory risk: Even in today’s privatized U.S. health care system, regulatory actions can make or break a health care company. Failure to win FDA approval can doom an experimental biotech, pharma or medical device company, and many hospitals are dependent on funding from Medicare and Medicaid to continue operating.
How to buy health care stocks
Individual health care stocks
It might be tempting to invest in specific health care stocks — after all, many of the stocks listed above have performed quite well in recent years.
But betting too much on an individual stock can be risky, and buying several individual health care stocks can be expensive. Individual stock-pickers also need to research stocks before buying, which can be time-consuming.
Another way to benefit from investing in several health care stocks is through an exchange-traded fund (ETF), of which dozens are available.
Others are more industry-specific. The iShares U.S. Medical Devices ETF, for example, is focused on the medical devices industry.
Researching an ETF is generally much quicker than researching each individual stock in that ETF, but it’s still important to do so. Consider looking up an ETF’s portfolio before investing.
Options and health care stocks
Frequently Asked Questions
What are some investment differences between different types of health care stocks?
Not all health care stocks behave the same way in a portfolio. Big companies, like insurers and facilities operators, are generally less volatile than small companies like biotech startups, and more likely to pay dividends. However, the higher risk for small companies comes with the possibility of higher rewards.
Would health care reform hurt all health care stocks?
The effects of government policy changes on health care stocks are more complex than you might think, and history suggests that the sector is good at adapting to big reforms. The Health Care SPDR Select Sector Fund actually outperformed the S&P 500 in the decade after the Affordable Care Act was passed in 2010.
Are profits from health care stocks tax-exempt?
No. Certain health care expenses can be deducted from your taxes under certain circumstances, but any profits you earn from health care stocks are just as taxable as any other stock profits unless you earn them in a tax-advantaged account.
Neither the author nor editor held positions in the aforementioned investments at the time of publication.