Goldman says healthcare is ripe for stock picking; here’s some they like

The healthcare sector’s slump had created opportunities for stock-pickers rather than broad sector gains, Goldman Sachs strategist David Kostin said.

Healthcare (XLV) has lagged the S&P 500 (SPY) (IVV) (VOO) by 8 percentage points year to date and is on pace for a third consecutive year of underperformance, with valuations near a record discount versus the broader index — even after accounting for megacap tech’s impact.

While low valuations suggested potential upside, Kostin noted that steady economic growth, AI enthusiasm, and policy uncertainty would likely limit sector-wide outperformance. Instead, he saw “more opportunity for alpha than beta,” citing wide return dispersion and an uptick in healthcare M&A as drivers for select winners. Nearly half of the firms in Goldman’s M&A Candidates basket were healthcare names, and the bank expected deal activity to continue growing into next year.

Looking at specific names, Goldman surfaced 29 Russell 1000 (IWB) healthcare stocks with positive recent consensus revisions to2026 EPS estimates that also trade at a valuation discount relative to history.

• Jazz Pharmaceuticals (JAZZ) market cap (billions) $8, YTD return 9%, NTM/PE current 7x, NTM/PE vs. 5Y median (14)%, Consensus 2026 EPS growth 203%, 3-month revision to 2026 EPS 14%

• Insulet Corporation (PODD) $23 24% 55 x (64)% 25% 12%

• Sotera Health Company (SHC) $5 17% 17 x (9)% 12% 11%

• Incyte Corporation (INCY) $21 52% 14 x (30)% 6% 10%

• Regeneron Pharmaceuticals, Inc. (REGN) $68 (9)% 15 x (4)% 6% 8%

• BioMarin Pharmaceutical Inc. (BMRN) $10 (21)% 12 x (74)% 56% 7%

• Universal Health Services, Inc. (UHS) $14 27% 10 x (16)% 8% 7%

• Doximity, Inc. (DOCS) $12 17% 39 x (8)% 2% 6%

• Neurocrine Biosciences, Inc. (NBIX) $15 13% 23 x (17)% 38% 4%

• Vertex Pharmaceuticals Incorporated (VRTX) $106 3% 21 x (1)% 16% 4%

• Illumina, Inc. (ILMN) $19 (9)% 25 x (63)% 6% 4%

• West Pharmaceutical Services, Inc. (WST) $20 (16)% 36 x (15)% 9% 3%

• DaVita Inc. (DVA) $9 (19)% 10 x (24)% 20% 3%

• Edwards Lifesciences Corporation (EW) $48 11% 29 x (5)% 10% 2%

• Eli Lilly and Company (LLY) $886 22% 31 x (13)% 30% 2%

• Zimmer Biomet Holdings, Inc. (ZBH) $18 (16)% 10 x (33)% 4% 2%

• Penumbra, Inc. (PEN) $10 11% 54 x (64)% 36% 2%

• Envista Holdings Corp. (NVST) $3 1% 16 x (13)% 9% 2%

• Medtronic Plc (MDT) $116 15% 15 x (4)% 8% 2%

• Veeva Systems Inc (VEEV) $48 39% 35 x (8)% 8% 2%

• Masimo Corporation (MASI) $8 (13)% 25 x (27)% 8% 2%

• Pfizer Inc. (PFE) $139 (1)% 8 x (24)% (2)% 2%

• Thermo Fisher Scientific Inc. (TMO) $213 9% 23 x (1)% 8% 1%

• ResMed Inc. (RMD) $36 10% 22 x (26)% 13% 1%

• Bio-Rad Laboratories, Inc. (BIO) $8 (7)% 28 x (5)% 6% 1%

• Certara, Inc. (CERT) $2 6% 21 x (38)% 25% 1%

• Align Technology, Inc. (ALGN) $10 (36)% 12 x (57)% 7% 1%

• Charles River Laboratories International, Inc. (CRL) $8 (7)% 16 x (17)% 6% 1%

• Hologic, Inc. (HOLX) $17 3% 16 x (8)% 7% 1%