Vertex and UnitedHealth Lead as Healthcare Sector Continues to Thrive

The healthcare sector has been one of the top-performing industries in recent months, with stocks returning 46.9% over the past six months and outpacing the S&P 500 by 25.5 percentage points.

However, investors should be cautious as the industry is heavily regulated, and changes to rules can negatively impact businesses.

Two healthcare companies that stand out are Vertex Pharmaceuticals (VRTX) and UnitedHealth (UNH), while one company to avoid is The Pennant Group (PNTG).

Vertex Pharmaceuticals has seen annual revenue growth of 13.5% over the last five years, beating the sector average, and its industry-leading return on capital demonstrates management's skill in finding high-return investments.

The company's stock price of $523.65 implies a valuation ratio of 40.4x forward P/E, making it an attractive option for investors.

UnitedHealth has also seen impressive growth, with 10.6% annual revenue growth over the last five years and unparalleled scale, enabling it to spread administrative costs across its large membership base.

The company's market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, making it a solid choice for investors.