In this piece, we will take a look at the 14 best medical stocks to invest in according to hedge funds. If you want to skip our overview of the medical and healthcare industry, then you can take a look at the 5 Best Medical Stocks To Invest In According to Hedge Funds.
The medical and healthcare industry is one of the biggest in the world. The medical industry is assured of a steady demand for its products and services simply due to the fact that human beings are biological creatures. This means that medical stocks such as Pfizer Inc. (NYSE:PFE) and hospital stocks such as Tenet Healthcare Corporation (NYSE:THC) are some of the biggest in the world. It also means that these stocks have the potential to capitalize on trends that can suddenly appear due to crises such as the coronavirus pandemic. While the fast paced nature of news cycles in the 21st century means that public focus quickly changes focus, in the immediate aftermath of the pandemic's rapid spread in 2020, investors were fretting and would have given an arm and a leg to prod the crystal ball into telling them which medical stock would be the right bet when it came to navigating the global healthcare prices.
As time would tell, medical stocks like Pfizer and the Cambridge, Massachusetts based biotechnology company Moderna, Inc. (NASDAQ:MRNA) were some of the hottest due to their vaccines. During the roughly year and a half between December 2019 and September 2021, Moderna's shares appreciated by a whopping 429% on the stock market - a result that shows that even small bets made at just the right time can yield juicy profits for investors from all walks of life. Pfizer's stock gained a more modest 50% during the same time period; but the difference between these gains is one that is understandable since Pfizer's current market capitalization of $155 billion is more than four times of Moderna's.
Additionally, another key difference between Moderna and Pfizer also applies to the broader categories of medical stocks that include high growth sectors such as biotechnology and somewhat more stable ones like medical device manufacturers and hospital operators. Pfizer, like its peers Eli Lilly and Company (NYSE:LLY), Johnson & Johnson (NYSE:JNJ), and Merck & Co., Inc. (NYSE:MRK), benefits from one of the classic principles of business management, a.k.a, diversification. These medical stocks have the luxury of sizeable balance sheets that allow them to participate in markets for simple medicines that can be produced at mass scale like blood thinners, as well as medical industry segments requiring massive capital expenditure and research capabilities such as biotechnology and genetic engineering.
However, with genetic engineering having entered the conversation, this particular area of medicine benefits from smaller companies that are able to laser focus on being able to change the very 'code' of the human body. At the same time, while the glitzy and glamorous nature of high technology areas such as artificial intelligence means that the bulk of public and media attention remains focused on them, recent months have also seen medical stocks involved in the genomics industry make strides. If you're interested, you can check out 12 Best Genomics Stocks To Buy Now for a detailed look at these stocks.
So what's big in genomics? Well, medical stocks Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) and BridgeBio Pharma, Inc. (NASDAQ:BBIO) scored big wins in December 2023 when the Food and Drug Administration (FDA) approved the first therapies for sickle cell disease that use gene therapy. According to Yale Medicine, Vertex's Casgevy essentially 'slices' a patient's DNA to improve odds of fighting sickle cell disease while BBIO's Lyfgenia introduces substances that improve blood health.
Yet, mega medical stocks Eli Lilly and Novo Nordisk A/S (NYSE:NVO) are also all the hype these days as their medications finally provide an off the shelf solution to lose weight. So much so that Eli Lilly's shares are up by a whopping 380% since 2020 while Novo Nordisk's stock has gained 275% over the same time period. Weight loss drugs are now a no longer a thing of the future, and investors have baked in their potential into medical stocks as well. You can read 11 Best Weight Loss Stocks To Invest In for more details.
With these details, let's look at some top medical stocks. Some notable picks are Thermo Fisher Scientific Inc. (NYSE:TMO), Danaher Corporation (NYSE:DHR), and UnitedHealth Group Incorporated (NYSE:UNH).
14 Best Medical Stocks To Invest In According to Hedge Funds
A veterinarian conducting a physical exam on a four-legged patient in a veterinary hospital, highlighting the company's work in veterinary health.
Our Methodology
To make our list of the best medical stocks to buy, we ranked the forty most valuable healthcare stocks by the number of hedge funds that had bought the shares as of Q4 2023 end. Out of these, the top stocks were selected as the best medical stocks.
For these best medical stocks, we used hedge fund sentiment. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
14 Best Medical Stocks To Invest In According to Hedge Funds
Boston Scientific Corporation (NYSE:BSX) is a medical devices company whose products help with disease diagnosis, disease management, imaging, and other areas. The shares are rated Strong Buy on average, and the average analyst share price target is $70.82.
As of Q4 2023 end, 71 out of the 933 hedge funds profiled by Insider Monkey had held a stake in Boston Scientific Corporation (NYSE:BSX). Ken Griffin's Citadel Investment Group was the biggest Boston Scientific Corporation (NYSE:BSX) shareholder through its $519 million investment.
HCA Healthcare, Inc. (NYSE:HCA) serves as the customer facing end of the medical supply chain since it owns and operates hospitals all over the U.S. It's been performing well on the financial front as of late by having beaten analyst EPS estimates in three out of its four latest quarters. To wit, the shares are also rated Strong Buy on average, and the average analyst share price target is $324.
During Q4 2023, 72 out of the 933 hedge funds part of Insider Monkey's database had bought and owned HCA Healthcare, Inc. (NYSE:HCA)'s shares. Jean-Marie Eveillard's First Eagle Investment Management was the biggest investor in our database as it owned $1.2 billion worth of shares.
HCA Healthcare, Inc. (NYSE:HCA) joins Danaher Corporation (NYSE:DHR), Thermo Fisher Scientific Inc. (NYSE:TMO), and UnitedHealth Group Incorporated (NYSE:UNH) in our list of the best medical stocks to buy.
AbbVie Inc. (NYSE:ABBV) is a healthcare and pharmaceutical company headquartered in Chicago, Illinois. It scored a win in February 2024 when its medicine for Parkinson's disease was cleared for sale in Canada.
As of December 2023 end, out of the 910 hedge funds covered by Insider Monkey's research, 76 had invested in AbbVie Inc. (NYSE:ABBV). Paul Marshall and Ian Wace's Marshall Wace LLP was the biggest investor as it owned 3.1 million shares that were worth $491 million.
The Cigna Group (NYSE:CI) marks the entry of the financial domain into our list of the best medical stocks since it is a healthcare plan provider. It's also one of the stronger stocks on our list when it comes to dividends as the firm announced a $1.40 dividend per share for a 1.50% yield in February 2024.
Insider Monkey scanned 933 hedge fund portfolios for their December quarter of 2023 shareholdings to discover that 76 had invested in the firm. The largest The Cigna Group (NYSE:CI) stakeholder is Larry Robbins's Glenview Capital due to its $641 million stake.
Pfizer Inc. (NYSE:PFE) is one of the biggest pharmaceutical companies in the world. The firm expanded its social credibility earlier this month when it teamed up with the American Cancer Association (ACA) as part of an impressive $15 million initiative to increase awareness about cancer screenings.
Insider Monkey dug through 933 hedge fund portfolios for their fourth quarter of 2023 investments and found that 79 were the firm's investors. The largest Pfizer Inc. (NYSE:PFE)'s shareholder out of these is D. E. Shaw's D E Shaw due to its $418 million investment.
Johnson & Johnson (NYSE:JNJ) is the iconic American personal wellness and healthcare company with a storied past. The firm is having an eventful February 2024 as its CEO was grilled by U.S. Senators on the sensitive issue of high drug prices for working class Americans.
81 out of the 933 hedge funds covered by Insider Monkey's Q4 2023 research had bought Johnson & Johnson (NYSE:JNJ)'s shares. Ken Fisher's Fisher Asset Management was the biggest investor, owning 6.3 million shares that are worth $996 million.
Thermo Fisher Scientific Inc. (NYSE:TMO), Johnson & Johnson (NYSE:JNJ), Danaher Corporation (NYSE:DHR), and UnitedHealth Group Incorporated (NYSE:UNH) are some top medical stocks that hedge funds are piling into.
Intuitive Surgical, Inc. (NASDAQ:ISRG) is one of the most advanced medical stocks in the world since it is among a handful of companies with a successful surgical robot. The fourth quarter of 2023 saw the firm maintain its growth trajectory as the DaVinci platform grew procedures by 21%.
For their fourth quarter of 2023 investments, 82 out of the 933 hedge funds tracked by Insider Monkey were the firm's shareholders. Intuitive Surgical, Inc. (NASDAQ:ISRG)'s largest hedge fund investor is Ken Fisher's Fisher Asset Management through its $1.5 billion stake.
Elevance Health, Inc. (NYSE:ELV) provides healthcare coverage plans and is one of the older medical stocks on our list since it was set up in 1944. Like other healthcare plan providers, while it managed to beat analyst EPS estimates for 2023's first three quarters, the fourth quarter ended up being an inevitable miss in hindsight.
During December 2023, 83 out of the 933 hedge funds part of Insider Monkey's database were the firm's investors. Elevance Health, Inc. (NYSE:ELV)'s largest stakeholder among these is Jean-Marie Eveillard's First Eagle Investment Management as it owns $838 million worth of shares.
Humana Inc. (NYSE:HUM) is another healthcare plan provider. The firm was out with some bad news for investors in February 2024 when it revealed that federal rates for its products had disappointed. However, the firm did maintain guidance for 2025.
By the end of last year's fourth quarter, 86 out of the 933 hedge funds covered by Insider Monkey's research had bought a stake in Humana Inc. (NYSE:HUM). Ken Griffin's Citadel Investment Group owned the biggest stake which was worth $688 million.
