In this article, we will look at the 10 Best Medical Stocks to Buy According to Billionaires.
Why are Healthcare Stocks Under Pressure?
Some experts view medical, healthcare, and big pharma stocks as immune from trade carnage, making them a safe haven amid the uncertainty brought about by Trump’s tariffs. On April 8, Mizuho Securities America healthcare sector strategist Jared Holz appeared on CNBC’s ‘Power Lunch’ to talk about whether the speculations around the healthcare sector being a safe haven during market turmoil are true. He also discussed why healthcare companies are failing to get increased investor respect, given that healthcare is 20% of the American economy, which translates to around 1/5th of the country’s entire national output.
Holz said that the country’s major healthcare and pharmaceutical companies undoubtedly help fight its healthcare problems. However, when we look at their financial models and the way their businesses are currently set up, we have got generic patent cliffs over the next 5-7 years on the medium to long-term angle of the company, along with price concessions with the IRA and some of the things the Biden administration put into place. We have also got pricing degradation over the near term, and between those two lies competition and other setbacks. The models thus never line up well enough for investors to have a lot of confidence, as the business models do not lend themselves to long-term viability. These are the primary reasons the sector and stocks have been under pressure for so long.
READ ALSO: 10 Best Mid Cap Biotech Stocks to Buy and 12 Best Diagnostics Stocks to Invest In Right Now.
Is Healthcare a Safe Haven Amid the Ongoing Tariff Turmoil?
Holz further opined that managed care, particularly the government-centric names, are somewhat safe as they are insulated from tariffs as US-based companies. In fact, the economic slowdown is actually beneficial for them as they want less utilization and less patience through the system, which is how they typically beat numbers. He said that managed care is having a good day, and investors might think about owning some companies in the sector.
It is, however, a relative game, as there are several different variables at play, and investors are essentially playing a game of hopscotch in an attempt to jump from one area to another, whether it’s tariffs, drug pricing, or other public policies. He painted a similar picture for medical device stocks that are more US-centric. These two sectors thus have less risk relative to others, making them somewhat of a safe haven.
With these trends in view, let’s look at the 10 best medical stocks to buy according to billionaires.
A closeup shot of a laboratory technician handling a medical device used for fertility treatments.
Our Methodology
In this article, we first sifted through ETFs and financial media reports to compile a preliminary list of stocks. We then examined Insider Monkey’s exclusive database of billionaire stock holdings to select the 10 best medical stocks with the most billionaire investors. These billionaires are founders or managers of some of the world’s leading hedge funds and companies.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Medical Stocks to Buy According to Billionaires
10. Elevance Health, Inc. (NYSE:ELV)
Number of Billionaire Investors: 16
Number of Hedge Fund Holders: 73
Elevance Health, Inc. (NYSE:ELV) is a health company that operates through the following segments: Health Benefits, CarelonRx, Carelon Services, and Corporate and Other. The Health Benefits segment offers a range of health plans and services, while the CarelonRx segment manages pharmacy services. The Carelon Services segment offers various healthcare-related services by integrating behavioral, physical, pharmacy, and social services.
The company has solid operations. It reported $45.0 billion in operating revenue in fiscal Q4 2024, reflecting an increase of $2.5 billion, or 6%, compared to the prior-year quarter. Operating income for the year reached $175.2 billion, up $5.0 billion, or 3%. This growth was attributed to higher premium yields in Elevance Health, Inc.’s (NYSE:ELV) Health Benefits segment, growth in CarelonRx product revenue, and acquisitions undertaken in 2024.
On April 9, Guggenheim initiated coverage of Elevance Health, Inc. (NYSE:ELV) with a Buy rating and a $518 price target. The same day, Mizuho also raised the firm’s price target on the company to $505 from $455, keeping an Outperform rating on the shares. The company takes the tenth spot on our list of the best medical stocks to invest in according to billionaires.
Artisan Select Equity Fund stated the following regarding Elevance Health, Inc. (NYSE:ELV) in its Q4 2024 investor letter:
“Elevance Health, Inc. (NYSE:ELV) took a couple of blows this quarter. First, it warned that its Medicaid earnings would come in below expectations this year. The Medicaid business has been in the spotlight as a result of COVID-19. Medicaid rolls filled up during the pandemic, but then rolls started to come down as enrollees lost eligibility when the economy began normalizing. This has made estimating the severity and health trends of the remaining population difficult. So far this year, cost trends have been much worse than expected and are out of line with Elevance’s approved rate structure. Margins in the Medicaid business, therefore, will be down this year, and overall profits are likely to be flat. We believe this is a temporary situation. State Medicaid programs are legally required to pay actuarially sound rates to the providers of Medicaid services, such as Elevance. Rates are expected, therefore, to move upward over the next 12 to 18 months, restoring Elevance’s margins to a more normal level.
The second issue for Elevance is investor sentiment. A mentally deranged young man murdered top executive of United Healthcare, the largest health insurer in the country. This led to an Internet frenzy of vicious, inaccurate and, frankly, deplorable criticisms of health insurance companies and their executives. Negative and controversial headlines tend to hurt share prices. This was true of Elevance’s stock in the aftermath of this heinous crime. The share price has fallen to extremely attractive levels, trading currently at about 11X earnings. We added to our position during this weakness.”
9. Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Billionaire Investors: 16
Number of Hedge Fund Holders: 100
Thermo Fisher Scientific Inc. (NYSE:TMO) provides analytical instruments, reagents, equipment, software, and other services for analysis, research, diagnostics, and discovery. It operates through the Analytical Instruments, Life Sciences Solutions, Laboratory Products and Services, and Specialty Diagnostics segments.
Analysts are bullish on the stock due to its recent strategic acquisition of SOLV’s Purification and Filtration business, valued at $4.1 billion. The acquisition is anticipated to boost Thermo Fisher Scientific Inc.’s (NYSE:TMO) standing in the bioprocessing sector, especially in filtration, aligning with its long-term growth strategy.
In addition, the company is on a solid growth trajectory and reported $11.4 billion in revenue in fiscal Q4 2024, reflecting a 5% year-over-year growth. Its strong cash position further bolsters its standing, as it generated over $7.3 billion in free cash flow in fiscal 2024. Thermo Fisher Scientific Inc. (NYSE:TMO) also has a strong dividend yield, with seven consecutive years of growth. It outperformed the sector median of two years by 250%, reflecting its ability to return value to its shareholders.
RBC Capital analyst Conor McNamara maintained a Buy rating on Thermo Fisher Scientific Inc. (NYSE:TMO) on April 1 and set a price target of $694.00. It ranks ninth on our list of the 10 best medical stocks to buy according to billionaires.
