Is This 1 Healthcare Stock Set For a Comeback?

For most of the last three years, investors couldn’t care less about healthcare. The market chased AI, semiconductors, and anything with “platform” in the name … while defensive sectors like pharma quietly bled lower.

But we may have finally reached a turning point.

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In the ratio chart below of healthcare vs. the S&P 500, you can see healthcare stocks (NYSEARCA: XLV) are now the cheapest they’ve been relative to the S&P (NYSEARCA: VOO) since 2001:

While the setup is compelling, I want to see technical strength and momentum: signs a real inflection has happened, so I can avoid “value traps.” One of the few names in the space flashing those positive signals is Novartis (NYSE: NVS) … our 2nd highest rated name in general drug manufacturers, and an A rated pick according to our Zen Ratings system.

Plus: NVS is shielded from White House drama … which is why I highlighted it back in May. Since then, it’s up over 20%. Here’s why I think it may keep winning. 

A Safe Compounder With Real Momentum

Novartis checks every box of the “safe momentum” formula investors are rediscovering:

• Low beta and steady earnings that hold up across cycles
• A 3%+ dividend yield backed by robust free cash flow
• Global diversification that limits exposure to U.S. price-control risk

It’s the same setup I like in GSK PLC (NYSE: GSK) … but with one key difference: momentum.

I love this massive 25+ year wedge/triangle pattern setup in GSK, and will be all over it when/if it breaks out … but it still has work to do: 

Meanwhile, NVS gained double digits since summer and continues to make new highs, outpacing the broader healthcare sector and signaling that money is finally rotating back into defensive quality. 

That’s what I mean when I say NVS is already breaking out while many peers remain stuck below resistance. It has momentum at its back, and no prior resistance overhead:

Our Zen Component Grades confirm this: NVS is one of the few names in the sector with a Momentum rating of B, signaling strong volume-weighted momentum and risk-adjusted momentum (notice NVS also scores a B in Safety). 

Check out NVS’s other Component Grade rankings here.

Reshaped for the Next Decade

As for fundamentals, Novartis is now fully focused on innovative medicines: oncology, immunology, and gene therapy … rather than lower-margin generics.

That streamlined structure boosts margins and clarity. Management is guiding for mid-single-digit revenue growth and expanding operating margins through 2027, driven by key drugs like Kisqali (breast cancer) and Pluvicto (prostate cancer), both gaining market share in large, defensible indications.

The pipeline depth and global reach make it one of the few pharma giants positioned to grow faster than the sector average without taking binary biotech-style risk.

Healthcare: The Deep Value Sector Nobody’s Talking About

Since 2021, investors have paid record premiums for tech and growth, while healthcare valuations have compressed to near two-decade lows.

Yet healthcare spending (particularly in prescription drugs and hospital care) continues to rise sharply, far outpacing inflation:

Source: Trilliant Health

That’s the kind of structural tailwind long-term investors crave, especially when it comes packaged in a company with NVS’s track record of defensive compounding.

The Bottom Line

For value-oriented investors tired of chasing overextended AI names, Novartis offers a rare mix of quality, stability, and upside:

• Rising momentum within a deeply undervalued sector
• Strong dividend and improving margins
• Global insulation from U.S. policy risk

The next quiet bull market could be in one of the world’s oldest businesses: keeping people alive and healthy.

Click here to analyze NVS stock.

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