10 Best Healthcare Stocks to Buy According to Hedge Funds

·9 min read

In this article, we will take a look at some of the best healthcare stocks to buy based on the data of over 860 hedge funds tracked by Insider Monkey. You can skip our detailed analysis of the healthcare industry and go directly to see 5 Best Healthcare Stocks to Buy According to Hedge Funds.

It’s soon going to be a full two years since the coronavirus pandemic broke out across the globe. According to the Centers for Disease Control and Prevention, there have been over 33 million coronavirus cases in the US so far, with almost 600,000 deaths. As people across the world started getting accustomed to the pandemic way of life, with the social distancing, mask-wearing, and work-from-home trends, it seems that most of us also grew accustomed and desensitized to the horrendous death toll that came with it.

The new normal, as it has come to be called, has certainly taken a grip over the world, and it’s not too clear when it will go away for good. Despite the existence of multiple vaccines now, including those made by Pfizer Inc. (NYSE: PFE)-BioNTech SE - ADR (NASDAQ: BNTX), Moderna Inc (NASDAQ: MRNA) and Johnson & Johnson (NYSE: JNJ), it’s unclear when the world will go back to how it was before. Currently, 64% of the adult population in the US has at least one vaccination done, so there might be room for hope somewhere in there that if the global community continues to get vaccinated, we might be able to go back to pre-social distancing days. Given this evident reliance on the global healthcare and pharmaceuticals industry, it is also not surprising that major healthcare providers or healthcare equipment manufacturers like UnitedHealth Group Incorporated (NYSE: UNH), Johnson & Johnson (NYSE: JNJ) and Pfizer Inc. (NYSE: PFE) are beginning to profit more.

Pfizer Inc. (NYSE: PFE), for instance, had a total revenue of $41.9 billion last year, while Johnson & Johnson’s (NYSE: JNJ) total sales in 2020 came in at $82.6 billion. Merck & Co., Inc. (NYSE: MRK), yet another big name in the industry, revealed their 2020 revenue to be $48 billion. When looking at statistics detailing pharmaceutical sales across the world in 2020, we realized that in the US alone, over $500 billion was spent on pharmaceuticals, while Europe was responsible for spending a little over $200 billion on the same. The value of pharmaceutical sales in 2020 across the world had crossed the $1 trillion dollar mark.

All of the above seeks to establish the importance and dominance of the healthcare and pharmaceutical industries across the world, especially in the aftermath of the coronavirus pandemic. With global awareness of the importance of healthcare rising especially in the midst of a pandemic, it is unsurprising to see these figures. In times of medical crisis, of course, medicine will be highly profitable. Thus, we have compiled this list of the 10 best healthcare stocks to buy according to hedge funds.

Some of the stocks already mentioned above come in this list, with UnitedHealth Group Incorporated (NYSE: UNH) being one of the most popular healthcare stocks among hedge funds currently. As of Q121, 89 hedge funds out of 866 funds tracked by Insider Monkey had stakes in this company, which has a market cap of $378 billion and has gained 14.88% year to date. Some of UnitedHealth Group Incorporated’s (NYSE: UNH) major hedge fund holders include Wellington Management Group, LLP with over 33 million shares in the company, and Capital Research Global Investors, with over 19 million shares.

Merck & Co., Inc. (NYSE: MRK) is yet another name familiar among major hedge funds, with 79 hedge fund holders and a $192.8 billion market cap.

Our Methodology

All of the stocks listed here were selected based on Insider Monkey’s data compilation of the most popular stocks among over 860 hedge funds as of Q121, and shortlisted from the healthcare providing, healthcare equipment, and pharmaceuticals sectors. We also took into account the long-term growth catalysts and fundamentals of these stocks while creating the list of the best healthcare stocks to buy.

best healthcare stocks to buy according to hedge funds
best healthcare stocks to buy according to hedge funds

Why pay attention to hedge funds when the hedged returns of the industry couldn’t keep up with the unhedged returns of the market indices over the last few years? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Best Healthcare Stocks to Buy According to Hedge Funds

10. CVS Health Corporation (NYSE: CVS)

Total Number of Hedge Fund Having Stakes in the Company: 62

CVS Health Corporation (NYSE: CVS) is a US-based healthcare company. They own CVS Pharmacy, CVS Caremark, and Aetna, among a plethora of other related businesses and chains. With headquarters in Woonsocket, Rhode Island, CVS Health Corporation (NYSE: CVS) ranks 10th on our list of the best healthcare stock picks by buy according to hedge funds.

Last month, CVS Health Corporation (NYSE: CVS) announced its decision to offer clinical study services to aid drug developers. It said that using analytics and local connections would help drug developers become familiar with the area, and benefit the medical research sector.

CVS Health Corporation (NYSE: CVS) currently has 62 hedge fund holders and a 7.2% popularity rating among hedge funds. The stock gained 22.16% year to date and has a market cap of $112.6 billion, plus a dividend yield of 2.35% or $2 per share.

Like BioNTech SE - ADR (NASDAQ: BNTX), Merck & Co., Inc. (NYSE: MRK), UnitedHealth Group Incorporated (NYSE: UNH), Johnson & Johnson (NYSE: JNJ) and Pfizer Inc. (NYSE: PFE), CVS Health Corporation (NYSE: CVS) is one of the best healthcare stocks to buy according to hedge funds.

9. Becton, Dickinson, and Company (NYSE: BDX)

Total Number of Hedge Fund Having Stakes in the Company: 65

Becton, Dickinson and Company (NYSE: BDX) is another American medical device company, a multinational corporation that works in the manufacture and sale of these devices, instrument systems, and reagents. Becton, Dickinson and Company (NYSE: BDX) also provides consulting and analytics services in various regions, and ranked 9th on our list of the top healthcare stock picks by hedge funds.

The company announced on June 8th that it had hit a high of 2 billion injection device orders from across the globe, in light of vaccine demand rising globally. Becton, Dickinson and Company (NYSE: BDX) is the world’s largest syringe-maker and announced that the order tally from Tuesday shows the commitment of the global community to vaccine proliferation.

Becton, Dickinson and Company (NYSE: BDX) has a market cap of $71.37 billion, and a dividend yield of 1.36% or $3.32 a share. The stock lost 2.11% year to date, yet has a 7.5% popularity rating among hedge funds and 65 hedge fund holders as of Q121.

8. Medtronic plc (NYSE: MDT)

Total Number of Hedge Fund Having Stakes in the Company: 65

Medtronic plc (NYSE: MDT) is an American-Irish medical device company. Primarily operating in the US with headquarters in Fridley, Minnesota, the company ranked 8th on our list of best healthcare stocks to buy according to hedge funds.

On June 10, the FDA approved Medtronic plc’s (NYSE: MDT)'s recharge-free spinal cord stimulation platform Vanta Implantable Neurostimulator. The device can be used for up to 11 years and provides pain relief to its patients with chronic pain by using Medtronic plc’s (NYSE: MDT) AdaptiveStim™ technology. Medtronic plc (NYSE: MDT) also rose 1.32% to $124.74 on the same day as the announcement of this news, outperforming industry competitors like Johnson and Johnson (NYSE: JNJ) which only rose 0.9% to $167.08.

Medtronic plc (NYSE: MDT) has 65 hedge fund holders and a popularity rating of 7.5% as of Q121. The stock gained 7.52% and has a market cap of $168 billion. Medtronic plc (NYSE: MDT) also has a dividend yield of 2.02% or $2.52 per share.

Like BioNTech SE - ADR (NASDAQ: BNTX), Merck & Co., Inc. (NYSE: MRK), UnitedHealth Group Incorporated (NYSE: UNH), Johnson & Johnson (NYSE: JNJ) and Pfizer Inc. (NYSE: PFE), Medtronic plc (NYSE: MDT) is one of the best healthcare stocks to buy according to hedge funds.

7. Abbott Laboratories (NYSE: ABT)

Total Number of Hedge Fund Having Stakes in the Company: 65

Abbott Laboratories (NYSE: ABT) is another medical device company based in the US. Its headquarters are in Abbott Park, Illinois, and the company ranked 7th on our list of the 10 best healthcare stocks to buy according to hedge funds.

Abbott Laboratories (NYSE: ABT) recently lowered its 2021 profit forecast in light of the COVID-19 pandemic situation in the US improving. Since the improved situation, the company claimed that there was “significantly lower recent and projected COVID-19 diagnostic testing demand,” hence the change in the profit forecast.

The stock gained 0.95% year to date and has a market cap of $195.7 billion. Abbott Laboratories’s (NYSE: ABT) dividend yield is 1.65% currently or $1.8 per share. Among hedge funds, its popularity rating is 7.5% with 65 hedge funds holding shares in Abbott Laboratories (NYSE: ABT).

Like BioNTech SE - ADR (NASDAQ: BNTX), Merck & Co., Inc. (NYSE: MRK), UnitedHealth Group Incorporated (NYSE: UNH), Johnson & Johnson (NYSE: JNJ) and Pfizer Inc. (NYSE: PFE), Abbott Laboratories (NYSE: ABT) is one of the best healthcare stocks to buy according to hedge funds.

6. Pfizer Inc. (NYSE: PFE)

Total Number of Hedge Fund Having Stakes in the Company: 65

Pfizer Inc. (NYSE: PFE) is an American multinational pharmaceutical industry company. It has headquarters in Manhattan, New York City, and was among the first healthcare companies to release a vaccine for the coronavirus. This vaccine is currently on the CDC’s list of recognized and safe vaccines to administer. Pfizer Inc. (NYSE: PFE) ranks 7th on our list of the best healthcare stocks to buy according to hedge funds.

Pfizer Inc. (NYSE: PFE) in collaboration with BioNTech SE (Nasdaq: BNTX) recently announced that both companies will be providing 500 million doses of COVID-19 vaccines to the US government, at a not-for-profit price.

Pfizer Inc. (NYSE: PFE) has gained 10.51% year to date and currently has a market cap of $227.7 billion, alongside a dividend yield of 3.83%. 65 hedge funds have holdings in this stock, and its popularity rating among hedge funds was 7.5% as of Q121.

Like BioNTech SE - ADR (NASDAQ: BNTX), Merck & Co., Inc. (NYSE: MRK), UnitedHealth Group Incorporated (NYSE: UNH) and Johnson & Johnson (NYSE: JNJ), Pfizer Inc. (NYSE: PFE) is one of the best healthcare stocks to buy according to hedge funds.

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Disclosure: None. 10 Best Healthcare Stocks to Buy According to Hedge Funds is originally published on Insider Monkey.

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