4 Healthcare Stocks to Watch as Defensive Demand Strengthens

The healthcare sector has quietly regained momentum in 2026, with the benchmark State Street Health Care Select Sector SPDR ETF (XLV) advancing 7.1% year to date as of Aug. 6. Investors have increasingly turned to the sector for its defensive characteristics amid periodic market volatility, while long-term structural drivers continue to reinforce confidence. Unlike highly cyclical industries, healthcare benefits from relatively stable demand, making it an attractive option for investors seeking resilience during uncertain economic conditions. BrightSpring Health Services, Inc. BTSG, Harmony Biosciences Holdings, Inc. HRMY, UnitedHealth Group Incorporated UNH and NovoCure Limited NVCR are four stocks that have benefited.

Structural Growth Drivers Remain Intact

The sector continues to enjoy favorable long-term fundamentals supported by rising health awareness, rapid technological innovation and the healthcare needs of an aging global population. Advances in medical technology, diagnostics and treatment options are improving patient outcomes while expanding growth opportunities across the industry. Investor interest has also been supported by stronger capital flows into healthcare-focused funds, particularly those with exposure to biotechnology, reflecting optimism about future innovation despite the industry's inherent volatility.

Policy and Earnings Challenges Persist

Despite these strengths, healthcare faces several headwinds. Regulatory uncertainty remains, with potential changes to Affordable Care Act subsidies, Medicaid funding, pharmaceutical pricing policies and tariffs creating uncertainty for future profitability. In addition, healthcare's projected earnings growth trails that of high-growth sectors such as information technology, consumer discretionary and industrials, making it less appealing for investors focused primarily on aggressive earnings expansion.

Defensive Appeal Supports Long-Term Outlook

Even with policy risks and comparatively modest earnings expectations, healthcare remains an important component of a diversified portfolio. Its defensive demand profile, supported by essential medical services and demographic trends, can help cushion portfolios during periods of economic weakness. While fluctuations in consumer purchasing power and volatility within certain healthcare subsectors may weigh on sentiment from time to time, the sector's combination of stability, innovation and long-term demand continues to support a constructive investment outlook for 2026.

Our Choices

The stocks below flaunt a Zacks Rank #1 (Strong Buy) or Rank #2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here, V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.

BrightSpring Health Services provides home and community-based healthcare through pharmacy, clinical, rehabilitation and supportive care services, serving Medicare, Medicaid and insured patients across the United States. BTSG’s expected earnings growth rate for the current year is 78%. The Zacks Consensus Estimate for its current-year earnings has improved 6.6% over the past 60 days. This Zacks Rank #1 company has a VGM Score of A.

Harmony Biosciences develops and commercializes therapies for rare neurological diseases, with treatments for narcolepsy and a pipeline targeting sleep disorders, epilepsy and other rare neurological conditions in the United States. HRMY’s expected earnings growth rate for the current year is 22.9%. The Zacks Consensus Estimate for its current-year earnings has increased 4.1% over the past 60 days. This Zacks Rank #1 company has a VGM Score of A.

UnitedHealth Group provides healthcare benefits, pharmacy services, care delivery, healthcare technology and data solutions, serving individuals, employers, government programs and healthcare providers in the United States and internationally. UNH’s expected earnings growth rate for the current year is 20.4%. The Zacks Consensus Estimate for its current-year earnings has increased 7.5% over the past 60 days. This Zacks Rank #1 company has a VGM Score of A.

NovoCure develops and commercializes tumor treating fields devices for solid tumor cancers, while advancing clinical research across multiple cancer types in markets worldwide. NVCR’s expected earnings growth rate for the next year is 41.8%. The Zacks Consensus Estimate for its current-year earnings has increased 21.9% over the past 60 days. This Zacks Rank #2 company has a VGM Score of A.

Bottom Line

Healthcare continues to offer a compelling blend of defensive stability and long-term growth potential, supported by demographic trends and medical innovation. While regulatory uncertainty remains a key risk, fundamentally strong companies with improving earnings outlooks and favorable estimate revisions, such as these four picks, are well-positioned to benefit from the sector's steady momentum.

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