It's not just the tech sector that's of interest to investors in the current bull market. Health care stocks are also getting attention. Take HCA Healthcare and Dow Jones Industrial Average heavyweight UnitedHealth – a blue-chip stock one expert says is not to be ignored.
"It's the most expensive, most important stock in the Dow Jones Industrial Average," Jay Woods, chief global strategist at Freedom Capital Markets, tells Investor's Business Daily's "Investing with IBD" podcast. "If you don't follow the UNH, and you follow the Dow, you're misguided."
Woods added that while UNH is not the most important stock in the broad market, if you're a trader who follows indexes like the Dow Jones, "you better know what it's doing."
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UnitedHealthcare is the biggest component of the Dow Jones Industrial Average, a price-weighted index. But is UNH stock a worthy portfolio addition in market sickness and in health?
The managed-care giant is having a rough start to 2024: It gapped down 3% on Wednesday on news that investigators at the Justice Department have been interviewing industry representatives in the sectors where UnitedHealth competes, including doctor groups.
The Dow Jones stock is ranked No. 6 in IBD's Medical-Managed Care industry group, according to IBD Research, and holds a less-than-ideal Composite Rating of 70.
UNH stock has been underperforming the S&P 500 since October 2022. Before that, the stock enjoyed many years of market outperformance. Right now, Woods says Dow Jones stocks are "sleeping."
There's a difference between a stock being important and a stock being a good trade idea. Woods says he "skate(s) to where the puck is, and the puck is in these leaders that bring out new technology, enhance and grow."
For that reason, in terms of stocks to buy and watch right now, Woods is focused more on names like UnitedHealth peer HCA.
Paying Attention To Health Care Plays
HCA Healthcare stock is up some 15% so far this year. Shares broke out of a cup-with-handle base at the beginning of 2024, and earnings and the end of January fueled more price gains. Last week, the stock cleared a three-weeks-tight area, which can be used as an add-on entry for existing shareholders.
The base case for health care stocks like HCA comes from the lengthening average life span of humans. "We're living longer," Woods said. "This is a growth industry."
He says HCA stock has good technicals, strong fundamentals and solid institutional backing — what Woods calls "triple blessings." Woods says all this sets up a favorable risk-reward scenario for a long-term play.
HCA runs 184 hospitals and 2,000 care sites across the U.S. and the U.K. The company has locations concentrated in the U.S. South, particularly in Texas and Florida.
"This is what I believe you can buy and put away because it's going to be very predominant in its field for a long time to come," Woods said.
Dow Jones Winners And Losers
But not every health care stock is a winner — even those in the Dow Jones Industrial Average. "I never understood what Walgreens Boots Alliance was; I thought it was a shoe company," Woods said humorously.
The health care and pharmacy company, named after the combined U.S. drugstore chain Walgreens and British pharmacy retail chain Boots, still held a vaunted place as part of the Dow Jones Industrial Average until it was recently replaced by Amazon.
Walgreens Boots Alliance was added to the Dow Jones in 2018 and was removed after the S&P Dow Jones Indices committee cited an evolving U.S. economy.
Walgreens stock is trading around 21 a share. It's down more than 18% since the start of the year. Shares have more or less been in a steady decline after hitting an all-time high of 97.27 in 2015.
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