3 Stocks With Excellent Upside Potential

The stock market is at an interesting juncture. Due to relentless buying over recent months, the major indices are at all-time highs.

Yet, there are some cracks forming under the surface. Participation in the market advance continues to decline. Trade deals have not materialized, and President Trump is once again threatening to raise tariffs. 

Given these set of circumstances and the market’s overbought status, investors should exercise caution and increased discretion. In today’s article, we will discuss how to navigate these conditions and spotlight 3 stocks that are primed for gains despite the challenging environment. 

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The S&P 500 has staged an impressive rally since its April 2025 lows, sporting a 28% gain from the lows, affirming that the bull market is alive and well.

However, the market is now overbought on a short-term timeframe, while there are increasing signs of froth. This is evident from a spike in call buying, margin levels, and aggressive buying in low-quality, speculative stocks.

(Source: CNN.com Fear and Greed Index)

Another concern is that while the stock market is strong from a top-down perspective. It’s a different story from the bottom-up. The number of new stocks making new highs is decreasing, indicating that fewer and fewer stocks are powering the indexes higher. This is also reflected in the underperformance of equal-weighted indices.

Additionally, the impetus for the brief bear market was President Trump’s tariffs, while the rally was triggered by him choosing to delay implementation while trade deals were negotiated. Now, we are rapidly approaching the August 1 deadline which could be the trigger for another bout of market volatility.

To be clear, these developments do not mean that the bull market is close to an end. But, it does mean that the risk-reward has shifted.  

3 Healthcare Stocks

History shows that even robust uptrends face periodic consolidation and/or sharp dips. Pullbacks of 3–7% are not only common but healthy, serving to reset sentiment and clear speculative excesses that tend to build as prices soar. 

In recent articles, we’ve highlighted the tailwinds propelling this rally: underinvested funds scrambling to catch up, robust corporate earnings, expectations of lower interest rates, and insatiable demand for AI-driven growth. 

While there are some near-term risks, these factors ensure that the intermediate and longer-term bullish trend remains intact. Investors can thread the needle by prioritizing stocks with stronger defensive characteristics in terms of valuation, financials, and growth.

Many stocks with these characteristics can be found in the healthcare sector. The sector has underperformed so far this year despite strong earnings due to concerns over Medicaid spending cuts in the One Big Beautiful Bill Act (OBBBA).  

Yet, this could be an opportunity for investors. The sector has a forward P/E of 16.8 which is significantly less than the S&P 500’s forward P/E of 23. It should also benefit from low rates given that many stocks in the sector pay generous dividends and have higher than average stock buybacks. Additionally, many of the cuts are not set to actually take place until 2028 which means there is plenty of time for them to be reversed.

Below, we will discuss 3 healthcare stocks that could outperform in the coming months: Veeva Systems (Nasdaq: VEEV), AbbVie (NYSE: ABBV), and HealthEquity (Nasdaq: HQY).

1. Veeva Systems (VEEV)

This is a cloud-based software platform for the global pharmaceutical industry that helps companies manage clinical trials, regulatory compliance, and customer relationships. Currently, its customers include 47 of the largest 50 biotech and pharmaceutical companies. in the world. 

VEEV combines the best attributes of tech and healthcare as it has steady, double-digit earnings growth, high margins, and an asset-light business while selling into the healthcare market which provides stable revenues and pricing power. 

The company has a remarkable streak of topping analysts’ earnings expectations for 20 straight quarters. Following its most recent earnings report, analysts hiked earnings estimates for the full-year, 2026, and 2027. Additionally, margins continue to expand due to lower costs and higher pricing. VEEV also provides investors exposure to AI given that it is able to deploy AI solutions to customers through its platform. 

VEEV is rated a Buy (B) by the Zen Ratings. B-rated stocks have delivered average annual performance of 19.9% which easily beats the S&P 500’s average annual gain of 10.8%. 

The company also earns an A for Sentiment, due to a flurry of analyst upgrades, following its strong Q1 earnings report. VEEV ranks in the top 3% of stocks for Financials as it has low levels of debt, strong cash position, increasing operational leverage, and efficiently deploys capital. 

2. AbbVie (ABBV)

One of the largest pharmaceutical companies in the world, AbbVie develops treatments for immunology, oncology, and neuroscience. It is well-known for Humira which is a treatment for arthritis and Crohn’s disease and Botox for aesthetics and therapeutics. 

In Q1, Abbvie topped expectations despite increasing generic competition for Humira. However, this was more than offset by strength in other categories such as immunology and neuroscience. As a result, ABBV increased its guidance for the full-year. 

It also has appeal to value investors given a forward P/E of 14.3 and a 3.4% dividend yield. Over the last decade, ABBV has averaged an annual 10% increase to its dividend payout. Of course, this dividend stream becomes more attractive in a falling-rate environment.

Wall Street is bullish as 8 of 14 analysts rate it a Buy or Strong Buy, with a $216 consensus target, implying 13% upside from current levels. This is a major reason that among 4,600+ stocks, ABBV ranks in the top 1% for Safety. It’s a reflection of the company’s consistency in cash flow, sales, earnings, and operational metrics. This is ideal for the current market environment. 

Overall, ABBV is rated a Buy (B) by the Zen Ratings. In addition to its A for Safety, the stock is rated a B for Financials and AI score. It is part of the General Drug Manufacturer Industry which has an Industry grade of A and ranks #6 out of 145 industry categories.

3. HealthEquity (HQY)

Healthequity (HQY) was founded in 2002 and specializes in health savings accounts (HSAs). The company offers platforms for managing HSAs, flexible spending accounts (FSAs), health reimbursement arrangements (HRAs), and COBRA continuation services, serving employers and consumers nationwide.

Currently, it administers 9.9 million HSAs, a 14% increase from the previous year. It has been offering higher-value services such as advisor tools, investment advice, and tax advice. Overall, HQY is in a prime position to capitalize on the growth of consumer-directed benefits. 

HQY provides an intriguing combination of growth and value with a forward P/E of 22 and expectations of 42% annual earnings growth over the next 3 years. Wall Street analysts are also bullish on the stock as 5 out of 8 analysts covering the stock have a Strong Buy rating, while 3 have a Buy rating. The current consensus price target is $121 which implies more than 20% upside from current levels. 

HQY’s positives are also reflected in the Zen Ratings with an overall Buy (B) rating. It also has B grades for Growth due to the company’s recent momentum in terms of revenue acceleration, increased free cash flow generation, and steady margin expansion. Another potential catalyst lingers as many believe that Congress may pass legislation which could increase the total number of eligible HSA accounts by 5 million.

Conclusion

The stock market’s relentless climb to all-time highs underscores a robust bull trend. Yet, it is clearly overbought and declining participation signals some sort of pause.

Investors should stay vigilant and use the Zen Ratings to identify stocks with strong defensive characteristics. Stocks like ABBV, HQY, and VEEV have attractive valuations, strong fundamentals and stable revenues, making them ideal for this current market environment. 

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