Recently, I’ve been looking into the U.S. healthcare sector, and I’ve realized that this field is truly worth spending more time researching. Many people only focus on tech stocks and consumer stocks, but in fact, biotech and medical concept stocks are the investment directions that are seriously undervalued.

First, let’s talk about why healthcare stocks are so special. How can people eat grains and not get sick? This industry is naturally unaffected by economic fluctuations, which already gives it an edge over many other sectors. With the global aging trend, continuous innovation of new drugs, and the increasing popularity of telemedicine, the entire market’s potential is really huge. The U.S. biopharmaceutical market is projected to reach $445 billion by 2027, with a compound annual growth rate of 8.5%. This number says it all.

But there’s an investment logic here that needs to be understood. The value of biotech and medical concept stocks mainly comes from future expectations, not current profits. Many biotech companies don’t have stable cash flow, and even their EPS can be negative, but as soon as a drug gets FDA approval, the stock price can skyrocket. The example of Huahai Pharmaceutical shows this well: in 2022, its stock price doubled, even though its EPS was still negative 2.93 yuan. Investors’ frenzy was driven by the potential future earnings they saw.

The operating logic of large pharmaceutical companies is also very interesting. They don’t stop investing in R&D just because they’re making money. Instead, they allocate 50% to 60% of their revenue into research, development, or acquisitions of small promising drug companies. This approach may lower EPS, but large investment institutions tend to raise their target prices because they know that continuous innovation will keep bringing future profits.

Regarding valuation methods, the industry often uses PSR (Price-to-Sales Ratio) to evaluate biotech and medical concept stocks because traditional PE ratios are not suitable. The most critical factor is FDA approval—since the U.S. FDA has the strictest monitoring standards worldwide, once a drug passes FDA, it’s much faster to get approval in other countries.

The reason the U.S. can cultivate the world’s best pharmaceutical industry is because they have a complete ecosystem. Nearly one million professionals work across R&D, manufacturing, sales, and other segments, gathering the best talent. The capital markets are also very willing to invest in this industry, creating a healthy cycle. In contrast, Taiwan’s healthcare industry is limited by national health insurance pressure on drug prices, so many drug companies are reluctant to bring in the best medicines. That’s the gap.

Looking at the leading U.S. stocks, Eli Lilly (LLY) is now the largest pharmaceutical company by market cap, valued at $842.05 billion, ranking 10th globally. Their weight-loss drugs market is expected to continue growing in the coming years, with North America accounting for about 60%, making it a biotech and medical concept stock worth watching. Pfizer (PFE) and Johnson & Johnson (JNJ) have stable stock performance and offer good dividends, making them suitable for dollar-cost averaging or long-term stock holding. J&J’s volatility is even smaller, making it the king of biotech stocks. AbbVie (ABBV) mainly earns from Humira; although its patents face challenges, they still hold over a hundred patents and continue investing in R&D to find the next blockbuster drug. Merck (MRK)’s Keytruda is one of the best-selling drugs worldwide, with steady stock growth. UnitedHealth (UNH) benefits from the aging U.S. population, with continuous growth in revenue and profits.

Taiwan’s biotech and medical concept stocks perform relatively modestly. Senda Chemical (1720) offers stable dividends, suitable for dividend investors. Kanghong Biotech (1783) has solid fundamentals, a healthy debt-to-asset ratio, and is also worth paying attention to. But honestly, Taiwan’s overall capital market still mainly focuses on electronics stocks, and even the best biotech companies rarely see the multi-fold gains like those in the U.S.

Investing in biotech and medical concept stocks indeed involves high risk and volatility. Clinical trial results, competitor movements, and policy changes can all trigger sharp fluctuations. But if you have enough patience and risk tolerance, the U.S. healthcare sector remains one of the most promising investment fields today. Compared to Asian markets, which are still developing and improving, U.S. biotech and medical stocks are far ahead in scale, innovation, and competitiveness, making it easier to find quality investment targets.