In this article, we will be taking a look at the 10 best healthcare stocks to buy under $20. To skip our detailed analysis of the healthcare sector, you can go directly to see the 5 Best Healthcare Stocks to Buy Under $20.
Global Healthcare Outlook for 2024
As 2024 progresses, the optimism surrounding the healthcare sector also continues to rise. While many investors were disillusioned with healthcare stocks in 2023 based on the sector’s underperformance, especially relative to the technology and communication services sectors, financial analysts are so far expecting greater things from healthcare in 2024. According to BlackRock’s 2024 outlook for healthcare, investors can expect a “favorable risk-reward environment” for healthcare this year. The outlook report noted that healthcare’s underperformance in 2023 has created an attractive entry point for investors looking to buy into this sector this year. The report said that the weighted average P/E of the MSCI World Healthcare index was trading at a 5% discount relative to the broader market as of this January.
Considering this, coupled with healthcare companies’ expected 12-month forward earnings growth, BlackRock foresees the healthcare sector to lead among all other sectors on a year-on-year basis in terms of its earnings growth, with only the information technology and consumer discretionary sectors being ahead of healthcare. As such, several major healthcare companies such as Eli Lilly and Company (NYSE:LLY), UnitedHealth Group Inc. (NYSE:UNH), and Thermo Fisher Scientific Inc. (NYSE:TMO) are beginning to attract greater investor attention in 2024 because of their projected profitability.
Healthcare Trends
The main sub-spaces to keep an eye on in healthcare this year include the pharmaceutical, medical devices and supplies, robotics, biotechnology, and neurodegenerative diseases areas. In terms of pharmaceuticals, the main trend of interest to interests is the rise and evolution of glucagon-like Peptide-1 agonists (GLP-1s), which have impacted weight reduction drugs significantly and have entirely changed the playing field in this area. Additionally, the rise of GLP-1s has also resulted in pharmaceutical companies offering weight loss drugs to benefit further from increased prescription volumes and sales. For instance, BlackRock noted that GLP-1 prescription volumes grew at a compound annual growth rate of 45% from 2019 to August 2023. The main contributors to this growth were notably Ozempic and Mounjaro, developed by leading pharmaceutical producers Novo Nordisk A/S (NYSE:NVO) and Eli Lilly and Company (NYSE:LLY), respectively. This has also resulted in the popularity of weight loss drug stocks rising recently.
With the rise of GLP-1s, many investors have become concerned about the impact of reductions in weight and related diseases through these drugs, particularly in relation to the medical devices and supplies sub-space. With patient populations for these conditions expected to decrease, investors are worried about a likely fall in demand for medical devices used in treating such patients. However, according to BlackRock, any impact on the medical devices industry in this regard is expected to be minimal. Resultantly, calls for selling medical device stocks may be premature.
When it comes to robotics, investors can find lucrative opportunities within the surgical robotics space as technological advancements in healthcare continue to develop. BlackRock forecasts that as a consequence of headwinds in the medical robotics area, operational deficiencies are now in greater focus than ever before, which has resulted in greater urgency for the development and use of advanced technology in the healthcare sector to enhance patient care.
Tech in Healthcare
In terms of tech involvement in healthcare, perhaps the most exciting area for investors today is artificial intelligence disruption in this sector. On April 8, Amir Dan Rubin, the CEO of Healthier Capital, joined CNBC’s “The Exchange” to discuss the rise of AI disruption in healthcare and where this is being observed most. Here are some of his comments:
“I think we’re gonna see it all over healthcare, both on the demand side, how consumers and employers interact with healthcare, and on the supply side, how we deliver healthcare more efficiently. Healthcare is a fifth of the economy, close to the fifth of the economy in the US, about 11% of GDP globally, so it’s a massive opportunity. And really, consumers are struggling in getting access to care, and then on the supply side, we’re having a struggle finding labor and clinicians to get easy access. So automating a lot of healthcare is going to be really important as we head to the next decade.”
For investors looking to benefit from the healthcare sector this year, remaining apprised of these major trends and keeping an eye on which insiders are piling into healthcare stocks today will be essential. Additionally, following the news surrounding some of the best affordable names in the healthcare sector to buy into today is another necessary step. As such, we have compiled a list of some of the best healthcare stocks to buy today, including some cheap healthcare stocks and some undervalued healthcare stocks to buy.
Scientist in a lab working on a research project, focusing on biotechnology and healthcare advancements.
Our Methodology
For our list of the best healthcare stocks to buy, we used a stock screener to first identify healthcare stocks with share prices below $20 as of April 15. We then used Insider Monkey’s hedge fund data for the fourth quarter to shortlist the top 10 stocks according to hedge funds. The stocks are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest number. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by over 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.
Best Healthcare Stocks to Buy Under $20
10. R1 RCM Inc. (NASDAQ:RCM)
Number of Hedge Fund Holders: 30
Share Price: $12.4
R1 RCM Inc. (NASDAQ:RCM) is based in Murray, Utah. It offers technology-driven solutions for the financial performance and patient experience of health systems, hospitals, and physician groups.
On April 10, an Overweight rating and $20 price target were reiterated on R1 RCM Inc. (NASDAQ:RCM) by Cantor Fitzgerald analysts.
There were 30 hedge funds long R1 RCM Inc. (NASDAQ:RCM) in the fourth quarter, with a total stake value of $558.3 million.
Voss Capital, LLC said the following about R1 RCM Inc. (NASDAQ:RCM) in its fourth-quarter 2023 investor letter:
“R1 RCM Inc. (NASDAQ:RCM) is a top player in outsourced Revenue Cycle Management for large hospitals and physician groups. Outsourced revenue cycle management is still in the early innings with only about 30% penetration, and we believe R1 has the most complete and scalable independent (i.e., not affiliated with an insurance company) solution in the marketplace, in what could prove to be a “winner take most” industry. With hospital profitability under pressure and coding and regulatory complexity ever increasing, R1 offers substantial savings via regional labor arbitrage and automation technology to customers through more efficient revenue collection.
The current management team came from Cloudmed, which R1 acquired very recently in June of 2022, and has undertaken the challenging task of cultural and technological integration while being relative public market newcomers under immense scrutiny. Cloudmed offers modular or single-point RCM solutions as opposed to a full end-to-end offering, and it counts 95 out of the top 100 hospitals in the US as customers. Cloudmed is a solid business with upwards of 40% EBITDA margins and 117% net revenue retention, and we think they can achieve a mid-teens revenue CAGR over the next few years while opening the door to upselling R1’s more robust service offering across the broader customer base…” (Click here to read the full text)
Like Eli Lilly and Company (NYSE:LLY), UnitedHealth Group Inc. (NYSE:UNH), and Thermo Fisher Scientific Inc. (NYSE:TMO), R1 RCM Inc. (NASDAQ:RCM) is among the best healthcare stocks to buy now.
9. Bausch Health Companies (NYSE:BHC)
Number of Hedge Fund Holders: 31
Share Price: $8.9
A Sector Perform rating and $12 price target were maintained on Bausch Health Companies (NYSE:BHC) by RBC Capital analysts on April 12.
Bausch Health Companies (NYSE:BHC) is a pharmaceutical company based in Laval, Canada, and is among the best healthcare stocks to buy. It develops, manufactures, and markets products in the gastroenterology, hepatology, neurology, dermatology, and eye health areas, among more.
Our hedge fund data for the fourth quarter shows 31 hedge funds long Bausch Health Companies (NYSE:BHC), with a total stake value of $1.1 billion.
GoldenTree Asset Management was the most prominent shareholder in Bausch Health Companies (NYSE:BHC) at the end of the fourth quarter, holding 27.6 million shares in the company.
8. Oscar Health, Inc. (NYSE:OSCR)
Number of Hedge Fund Holders: 31
Share Price: $14.9
At the end of the fourth quarter, Deerfield Management was the largest shareholder in Oscar Health, Inc. (NYSE:OSCR), holding 11.2 million shares in the company.
Oscar Health, Inc. (NYSE:OSCR) is a life and health insurance company based in New York. It offers health plans in individual and small-group markets.
An Outperform rating and $20 price target were placed on Oscar Health, Inc. (NYSE:OSCR) on March 22 by Raymond James analysts.
Oscar Health, Inc. (NYSE:OSCR) was seen in the 13F holdings of 31 hedge funds in the fourth quarter, with a total stake value of $439.8 million.
Longleaf Partners mentioned Oscar Health, Inc. (NYSE:OSCR) in its fourth-quarter 2023 investor letter:
“Oscar Health, Inc. (NYSE:OSCR) – Health insurance and software platform Oscar Health was the top contributor in the fourth quarter and for the year, after the stock price appreciated over 270% in 2023. Oscar was a top detractor in 2022 and highlights the importance of pragmatically revisiting the case for our decliners and not panic selling or adding too early on price declines. It is also a good reminder that game-changing value creation can come in unexpected ways, as it did with Mark Bertolini joining as CEO at Oscar this year. We couldn’t have modeled this as a driver, but we did recognize the stock price had become unduly punished alongside most tech-related businesses in 2022 and had confidence the business would rebound strongly. We remained engaged with management and the board to encourage proactive steps to close the extreme value gap. Oscar did benefit from a general rally in tech businesses coming out of 2022 weakness, but the positive price movement was primarily a direct reflection on the management upgrade and operational execution. Mark Bertolini brings significant operational expertise, as well as a strong endorsement value to the business, given his long-term track record as CEO of Aetna, which he sold to CVS for a great outcome for Aetna shareholders. Bertolini’s compensation package aligns his interests with shareholders, and he only really starts getting paid when the stock trades at $11 (vs the still discounted ~$9 level where the stock ended the year). In his first year, he has in quick order improved cost control and operational efficiency that drove EBITDA strength. Oscar reported another great quarter in November, beating expectations across most metrics and increasing 2024 guidance. The original venture investor holders beyond Thrive remain an overhang on the share price, and Oscar still offers significant upside from here.”
7. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
Number of Hedge Fund Holders: 31
Share Price: $17.8
In the fourth quarter, 31 hedge funds were long Walgreens Boots Alliance, Inc. (NASDAQ:WBA), with a total stake value of $687.8 million.
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is a drug retail company on our list of the best healthcare stocks to buy. It operates and offers retail drugstores, health and wellness services, and home delivery pharmacy services, among more.
As of April 3, TD Cowen analysts hold a Buy rating and $35 price target on Walgreens Boots Alliance, Inc. (NASDAQ:WBA).
Sessa Capital was the largest shareholder in Walgreens Boots Alliance, Inc. (NASDAQ:WBA) at the end of the fourth quarter, holding 3.8 million shares in the company.
6. Envista Holdings Corporation (NYSE:NVST)
Number of Hedge Fund Holders: 33
Share Price: $19.2
Envista Holdings Corporation (NYSE:NVST) is a healthcare equipment company based in Brea, California. It develops dental products such as dental implant systems, guided surgery systems, biomaterials, and more.
At the end of the fourth quarter, 33 hedge funds held stakes in Envista Holdings Corporation (NYSE:NVST), with a total stake value of $565.9 million.
Jefferies analysts maintain a Hold rating and $23 price target on Envista Holdings Corporation (NYSE:NVST) as of February 9.
Here’s what TimesSquare Capital Management said about Envista Holdings Corporation (NYSE:NVST) in its fourth-quarter 2023 investor letter:
“Our preference within Health Care is for novel therapies to address unmet medical needs, specialized providers, and innovators. Envista Holdings Corporation (NYSE:NVST) develops and manufactures dental products. We exited the position on the combination of disappointing third quarter results and lowered forward guidance. They reported softness in adult orthodontics and high-end implants. Envista’s stock sold off by -19% while held during the quarter.”
Like Eli Lilly and Company (NYSE:LLY), UnitedHealth Group Inc. (NYSE:UNH), and Thermo Fisher Scientific Inc. (NYSE:TMO), Envista Holdings Corporation (NYSE:NVST) is among the best healthcare stocks to invest in today.
Click to continue reading and see the 5 Best Healthcare Stocks to Buy Under $20.
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Disclosure: None. 10 Best Healthcare Stocks to Buy Under $20 is originally published on Insider Monkey.
