I believe medical and healthcare stocks represent some of the top UK shares to buy and hold right now. Stocks in the industry suffered greatly during the pandemic as resources were reallocated towards treating Covid-19. Many stocks in the sector are yet to recover and share prices still sit below pre-pandemic levels. This is the case despite pent-up demand for elective and private medical procedures.
In England alone, there are now more than six million people waiting on elective procedures. What’s more, there is considerable political will to reduce the waiting list and I think medical device companies and private healthcare providers stand to profit.
The two stocks I want to look at today are medical device giant Smith & Nephew (LSE:SN) and private hospital firm Spire Healthcare (LSE:SPI).
Smith & Nephew
I think Smith & Nephew is a good buy for my portfolio. But while it has a passive-income offering, I’m more interested in its upside potential.
As I write, the medical device giant is trading at around 1,215p per share, considerably discounted from a year-high of 1,592p in July 2021. The share price threatened to push above 2,000p for the first time prior to the Covid-19 pandemic.
The London-headquartered firm returned a profit in 2020 and 2021 despite the tough operating environment. The $586m pre-tax profit in 2021 was some distance behind the $743m recorded in 2019, but it’s worth remembering that the start of 2021 saw record Covid-induced hospitalisations.
There’s certainly ongoing risks for this sector as Covid-19 continues to linger. Of course, it is highly likely new variants will emerge, but we can only hope they’re less virulent and contagious.
Despite this, I feel confident that 2022 will be more profitable for Smith & Nephew. I see it benefitting from sizeable waiting lists and pent-up demand for elective procedures.
Spire Healthcare Group
The Spire Healthcare Group doesn’t fit in perfectly with the category of ailing medical and healthcare providers. Its share price is actually above 2018 and 2019 levels when the company registered growth issues.
Last summer, the share price jumped around 25% in a day following a proposed acquisition by Australia’s Ramsay Health Care. The deal fell through but the share price has remained around the 240p mark ever since.
However, the Spire share price – around 244p as I write – is hugely discounted compared to the near-400p seen in 2016. Personally, I think the share price will return to these levels on the back of huge demand for medical procedures.
Research by the Institute for Public Policy Research suggests that the pandemic prompted more people to purchase private health insurance or pay for treatment as the NHS struggled to keep up with demand. And with more than six million people waiting for NHS treatments, I’m confident that the Spire Healthcare Group will do a roaring trade this year and the next.
I have recently bought shares in both these companies and may buy more soon.