In this article, we will be taking a look at the 10 best medical stocks to buy now.
Navigating the Healthcare Landscape: Investment Opportunities and Growth Trends
The medical and healthcare industry is one of the largest globally, with a steady demand for products and services due to the biological nature of humans. Stocks like Pfizer Inc. (NYSE:PFE) and Tenet Healthcare Corporation (NYSE:THC) are among the biggest in the world, benefiting from trends that arise during crises like the coronavirus pandemic. Following the pandemic’s rapid spread in 2020, investors were eager to identify the best medical stocks to navigate the global healthcare crisis.
This industry is highly capital-intensive and competitive, encompassing various subsectors, including pharmaceutical companies, healthcare plan providers, medical equipment manufacturers, and hospitals. While healthcare plan providers and pharmaceutical firms often capture consumer attention, hospitals tend to be overlooked, despite their status as publicly traded entities. According to McKinsey, the medical industry’s overall profits are projected to grow at a compound annual growth rate (CAGR) of 4%, increasing from $654 billion in 2021 to $790 billion by 2026. Notably, the hospital sector is expected to grow at a remarkable CAGR of 12.5%, reaching $2 trillion by 2028. Similarly, the pharmaceutical manufacturing segment, valued at $358 billion in 2020, is forecasted to surge to $1.2 trillion by 2030, reflecting a CAGR of 13%.
Over time, medical companies such as Pfizer and Moderna, Inc. (NASDAQ:MRNA), a biotechnology company based in Cambridge, Massachusetts, were among the most sought-after due to their vaccines. On the stock market, Moderna’s shares increased by an astounding 429% between December 2019 and September 2021. This outcome demonstrates that even modest wagers placed at the ideal moment can provide investors from all backgrounds with large returns. During the same period, Pfizer’s stock saw a more moderate 50% gain; nevertheless, the gap in gains is comprehensible given that Pfizer currently has a market value of more than four times that of Moderna, at $155 billion.
With these details, let’s look at some top medical stocks. Some notable picks are Thermo Fisher Scientific Inc. (NYSE:TMO), Johnson and Johnson (NYSE:JNJ), and UnitedHealth Group Incorporated (NYSE:UNH).
A patient in the medical chair, receiving a treatment with the company’s ophthalmic medical technology.
Our Methodology
For our methodology, we first sifted through the US pharmaceutical, medical devices, and healthcare ETFs and selected stocks that were weighted the highest. After choosing these stocks, we ranked them based on their total number of hedge fund holders as of Q2 2024.
“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).”
Here is our list of the 10 best medical stocks to buy now.
10. Stryker Corp (NYSE:SYK)
Number of Hedge Fund Holders: 53
Stryker Corporation (NYSE:SYK) is a leading global medical technology company that specializes in developing, manufacturing, and selling a wide range of medical devices and equipment. The company’s product portfolio includes orthopedic implants, surgical equipment, neurovascular products, and patient handling and emergency medical equipment.
AI was being used by Stryker Corporation (NYSE:SYK) in 2022 for patient monitoring and surgical preparation. The company also announced in August that it had acquired care.ai, a privately-held business that provides ambient intelligence, smart room technology, and AI-assisted virtual care workflows. Stryker Corporation (NYSE:SYK) hopes to expand its portfolio of wirelessly connected medical devices and enhance its expanding healthcare IT offering with this acquisition.
Stryker Corporation’s AI initiatives aim to address healthcare challenges like nursing shortages and overworked staff. By acquiring care.ai, the company plans to create a smart care ecosystem with dynamic clinical workflows. As a result, Stryker raised its 2024 full-year guidance, increasing its organic sales growth expectations from 9% to 10%.
Stryker Corporation (NYSE:SYK) was recognized by Baron Funds in its investor letter for the first quarter of 2024. Here is what the fund said:
“We also added to Surgery Partners, Inc., a leading operator of ambulatory surgery centers, and Stryker Corporation (NYSE:SYK), a large diversified medical device company. We think Surgery Partners should benefit from a multi-year trend of surgical procedures migrating from inpatient hospitals to outpatient centers. Stryker reported strong fourth quarter financial results, highlighted by 11.5% organic revenue growth, and management provided solid guidance for 2024, calling for 7.5% to 9.0% organic revenue growth and double-digit EPS growth.”
In Q2 2024, 53 hedge funds tracked by Insider Monkey held stakes in the stock with Fundsmith LLP being the largest stakeholder from these, with shares worth $1,822,468,826. The stock holds a Strong Buy rating. In the past 3 months, 19 Wall Street analysts have set a 12-month price target for Stryker, with an average of $380.56, a high of $405.00, and a low of $345.00, representing a 5.95% increase from the last price of $359.19.
9. Bristol-Myers Squibb Company (NYSE:BMY)
Number of Hedge Fund Holders: 61
Bristol-Myers Squibb Company (NYSE:BMY) is a global biopharmaceutical company that discovers, develops, and delivers innovative medicines to help patients overcome serious diseases. Earlier in 2024, Bristol-Myers Squibb finalized a $14 billion deal to acquire Karuna Therapeutics and its promising psychosis drug, KarXT. However, the company’s stock declined after recording a $12.9 billion expense for in-process research and development related to the acquisition during the first quarter. As of September 22, the stock has fallen by just over 4% since the beginning of the year.
Despite recent challenges, Bristol-Myers Squibb Company (NYSE:BMY) continues to demonstrate strong growth potential. In the second quarter of 2024, the company posted $12.2 billion in revenue, marking a 9% rise compared to the same quarter last year. U.S. revenue grew by 13% year-over-year, reaching $8.8 billion, driven by both the Growth and Legacy portfolios. The company’s pipeline features five late-stage experimental drugs and with several products already on.
As of Q2 2924, 61 hedge fund tracked by Insider Monkey held stakes in the stock, with Pzena Investment Group being the largest stakeholder among these, with 14,134,337 shares worth $586,999,016.
8. Intuitive Surgical, Inc. (NASDAQ:ISRG)
Number of Hedge Fund Holders: 67
Intuitive Surgical, Inc. (NASDAQ:ISRG) is a pioneering biotechnology company that specializes in robotic-assisted surgical systems, primarily known for its flagship product, the da Vinci Surgical System. At its core, Intuitive develops, manufactures, and markets robotic products designed to improve clinical outcomes through minimally invasive surgery.
The increasing adoption of AI-driven Da Vinci systems has significantly boosted Intuitive’s financial performance. In 2023, Intuitive Surgical, Inc. (NASDAQ:ISRG) recorded a 14% revenue increase, with 1,370 systems installed globally, reflecting an 8% year-over-year growth. System sales in Q4 reached $480 million, highlighting strong demand. The volume of procedures using these systems surged by 21%, contributing to a 17% rise in quarterly revenue, which totaled $1.93 billion. Operating income also saw a 20% jump, indicating the growing use of its AI-powered surgical technology.
Intuitive Surgical, Inc. (NASDAQ:ISRG) reported $2.01 billion in revenue for Q2 2024, a 14% year-over-year increase. This growth was driven by a 17% rise in da Vinci procedures, 341 system placements, including 70 units of the new da Vinci 5 platform, and a 14% expansion of its global installed base to 9,203 systems. The Instruments & Accessories segment, making up nearly 60% of total revenue, grew by 16% to $1.24 billion.
As of Q2 2024, 67 hedge funds tracked by Insider Monkey held stakes in the stock with Fisher Asset Management being the largest stakeholder with shares worth $2,089,093,098. The stock also holds a Moderate Buy rating. In the past 3 months, 18 Wall Street analysts set a 12-month price target for Intuitive Surgical, with an average of $490.06.
7. AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders: 67
AbbVie Inc. (NYSE:ABBV) is a pharmaceutical company with a significant focus on immunology and oncology. Its next-generation immunology drugs, Skyrizi and Rinvoq, are driving growth despite biosimilar competition for the older drug Humira. Both Skyrizi and Rinvoq are expected to grow due to their leading efficacy in major immunology indications and have patent protection until the early/mid-2030s. Additionally, AbbVie’s strong aesthetics business, led by Botox, benefits from long product cycles due to brand strength and physician loyalty.
AbbVie Inc. (NYSE:ABBV) is projected to achieve mid-single-digit sales growth over the next three years, due to limited patent losses. Additionally, the $10 billion acquisition of ImmunoGen, which added the antibody-drug conjugate Elahere to its oncology portfolio, is expected to contribute significantly, with sales anticipated to exceed $2 billion by the end of the decade, according to Barclays.
In Q2 2024, AbbVie Inc. (NYSE:ABBV)’s worldwide revenues reached $14.462 billion, marking a 4.3% increase reported and 5.6% operational growth compared to Q2 2023, exceeding Wall Street expectations by 3.1%. The growth was largely driven by its immunology portfolio, with Skyrizi sales rising nearly 45% to $2.7 billion and Rinvoq sales increasing almost 56% to $1.4 billion. Additionally, the oncology portfolio saw a 10.5% increase in global sales, reaching $1.6 billion. However, this growth was partially offset by a 29.8% decline in Humira sales, which fell to $2.8 billion due to competition from biosimilars.
As of Q2 2024, from the total hedge funds tracked by Insider Monkey, 67 hedge funds held stakes in the stock with Citadel Investment Group being the largest stakeholder with 2,617,800 shares worth $449,005,056. 15 Wall Street analysts have set a 12-month price target for AbbVie, averaging $199.57. The forecasts range from a high of $218.00 to a low of $170.00, indicating a potential 4.4% increase from the current price of $191.16.
6. Abbott Laboratories (NYSE:ABT)
Number of Hedge Fund Holders: 69
Abbott Laboratories (NYSE:ABT) is a global healthcare company renowned for its diverse medical devices, diagnostics, nutritional products, and branded generics. Notable innovations include the FreeStyle Libre for diabetes management and minimally invasive cardiovascular technologies like MitraClip and Amplatzer Amulet. In oncology, Abbott focuses on innovative diagnostic technologies, particularly the Alinity m system for early cancer detection. The recent acquisition of Cardiovascular Systems, Inc. (CSI) further enhances Abbott’s vascular device portfolio, opening new opportunities in cancer-related treatments.
Abbott Laboratories (NYSE:ABT) reported Q2 2024 sales of $10.4 billion, reflecting a 4.0% increase in reported sales and 9.3% organic growth which was primarily driven by strong performance in Medical Devices. GAAP diluted EPS was $0.74, while adjusted EPS reached $1.14. Abbott raised its full-year 2024 EPS guidance to $3.30-$3.40 GAAP and $4.61-$4.71 adjusted and narrowed its organic sales growth forecast to 9.5%-10.0%. Recent key product approvals include the Esprit BTK system, Lingo and Libre Rio™ glucose monitoring systems, and the AVEIR dual chamber leadless pacemaker.
From the total hedge funds tracked by Insider Monkey, 69 hedge funds held stakes in the stock. The largest stakeholder in the stock out of these was Fisher Asset Management with 10,516,289 shares worth $1,092,747,717. Analysts are also bullish on ABT giving it a Strong Buy rating. 15 Wall Street analysts have set a 12-month price target for Abbott Laboratories, with an average of $127.36. The forecasts range from a high of $143.00 to a low of $107.00, indicating a potential 12.94% increase from the current price of $112.77.
5. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 80
Johnson & Johnson (NYSE:JNJ) stands fifth among the best medical stocks to buy now. It is a global healthcare powerhouse that operates across three main segments: pharmaceuticals, medical devices, and consumer health products.
Johnson and Johnson (NYSE:JNJ)’s Regulatory approvals for TREMFYA and RYBREVANT have been obtained. Its position in medical technology and cardiovascular intervention was bolstered by its acquisition of Shockwave Medical in April. Between 2025 and 2030, all segments are projected to increase at a compound annual growth rate of 5-7%. Additionally, approximately 10 assets in the Innovative Medicine area have the potential to produce anticipated operational sales of over $5 billion each.
As of Q2 2024, out of the total number of hedge funds tracked by Insider Monkey, 80 held stakes in the stock with Fisher Asset Management being the largest stakeholder with 7,009,439 shares worth $1,024,499,855. The stock holds a Moderate Buy rating. 14 Wall Street analysts have set a 12-month price target for Johnson & Johnson, averaging $171.83. Forecasts range from a high of $215.00 to a low of $150.00, indicating a potential 6.97% increase from the current price of $160.64.
4. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 96
Merck & Co., Inc. (NYSE:MRK) is a U.S.-based pharmaceutical company that focuses on producing vaccines and providing hospital care services. Its top-selling cancer drug, Keytruda, is a standout product with global recognition.
In Q2 2024, Merck & Co., Inc. (NYSE:MRK)’s Human Health business grew by 11%, Animal Health sales rose 6%, and its cancer drug KEYTRUDA saw a 21% increase, reaching $7.3 billion. GARDASIL sales increased 4% to $2.5 billion, and VAXNEUVANCE grew 16% to $189 million. The company benefited from rapid international launches. Merck’s new pneumococcal vaccine, CAPVAXIVE, received FDA approval and an ACIP recommendation, while its acquisition of EyeBio marks a venture into ophthalmology. Additionally, Merck’s Animal Health unit acquired Elanco’s aqua business. Merck also launched WINREVAIR, a new vaccine for pulmonary arterial hypertension, generating $70 million in sales.
As of Q2 2024, from the total number of hedge funds that Insider Monkey tracked, 96 held stakes in the stocks with Fisher Asset Management being the largest stakeholder with shares worth $$1,766,132,800. Analysts are also bullish on MRK giving it a Strong Buy rating. 19 Wall Street analysts have set a 12-month average price target of $140.64 for Merck & Co., with forecasts ranging from $125.00 to $155.00, indicating a potential 22.58% increase from the current price of $114.73. This makes MRK one of the best medical stocks according to analysts.
Regarding Merck & Co., Inc. (NYSE:MRK), Baron Funds’ Baron Health Care Fund made the following statement in its investor letter for the first quarter of 2024:
“Global pharmaceutical company Merck & Co., Inc. (NYSE:MRK), Inc. contributed to the continued growth of Keytruda, the company’s key asset and the leading immuno-oncology agent used to treat a variety of cancers. The FDA’s late March approval of pulmonary arterial hypertension drug sotatercept, also drove share gains. We retain conviction as Merck has started to transition from prioritizing its Keytruda franchise to building a more diversified business, with a focus on the Gardasil vaccine, pneumococcal vaccine development, and cardiovascular drug development, well in advance of the scheduled expiration of patent protection/exclusivity rights.”
3. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Holders: 100
Eli Lilly and Company (NYSE:LLY) is a global pharmaceutical giant that develops, manufactures, and sells a wide range of medications. At its core, Eli Lilly focuses on creating innovative drugs to treat various medical conditions, including diabetes, cancer, autoimmune disorders, and neurological diseases.
Zepbound and Mounjaro, two medications from Eli Lilly and Company (NYSE:LLY), have been approved to treat obesity and type 2 diabetes, respectively, and are anticipated to bolster the company’s present revenue base. Tirzepatide is the same active ingredient in both therapies. Zepbound brought in $1.2 billion and Mounjaro about $3.1 billion respectively in the second quarter. By 2029, analysts project a $50 billion increase in medicine sales.
In Q2 2024, out of the total number of hedge funds tracked by Insider Monkey, 100 hedge funds held stakes in the stock with Fisher Asset Management being the largest one of these with 4,888,710 worth $4,426,141,743.
Here is what Baron Funds, an investment management company, said about Eli Lilly and Company (NYSE:LLY) in its second-quarter 2024 investor letter.
“Shares of global pharmaceutical company Eli Lilly and Company (NYSE:LLY) increased on continued investor enthusiasm around GLP-1 drugs for diabetes and obesity. We remain shareholders. Lilly’s Mounjaro/Zepbound not only offers superb blood sugar control for diabetics but can drive 20%-plus weight loss and likely improve cardiovascular outcomes in both diabetic and non-diabetic obese patients. Lilly is developing next-generation drugs, including retatrutide, which drives approximately 25% weight loss, and orforglipron, a daily pill that produces approximately 15% weight loss. In the U.S. alone, there are 32 million Type 2 diabetics and an additional 105 million obese patients who we estimate would qualify for GLP-1 drugs. Although supply and access are limited near term, we think GLP-1 drugs will become the standard of care for both diabetes and obesity and will become a $150 billion-plus category. We see Lilly setting a high efficacy bar and capturing significant long-term market share. We think the adoption of GLP-1s will drive Lilly to triple total revenue by 2030.”
2. Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Fund Holders: 108
Thermo Fisher Scientific Inc. (NYSE:TMO), a prominent American company in biotech and life sciences, offers a diverse range of products and services. The company has seen significant expansion, largely fueled by key acquisitions such as Life Technologies and Affymetrix. Among its notable investors are billionaires Ken Fisher, Ken Griffin, and Israel Englander.
The company’s Q2 2024 revenue of $10.5 billion represented a 1.3% year-over-year reduction, although it was still $23.4 million higher than analysts had predicted. Thermo Fisher’s free cash flow increased to $1.7 billion from $1.26 billion, while operating cash flow improved to $1.96 billion from $1.54 billion in the prior year.
Regarding Thermo Fisher Scientific Inc. (NYSE:TMO), Polen Focus Growth Strategy made the following statement in its investor letter for the first quarter of 2024:
“We increased our positions in Thermo Fisher Scientific Inc. (NYSE:TMO), Visa, Zoetis, Nike, and Abbott Labs. Each of these companies is durable and available at attractive valuations, in our view, for the growth we see ahead. In fact, in the case of ThermoFisher, Nike, and Abbott Labs, we expect accelerating earnings growth in the back half of 2024 after more difficult earnings growth periods pass for each of these companies. ThermoFisher and Abbott will finally wind down most of their COVID-19 testing and vaccine-related efforts due to a lack of demand, so these should no longer be revenue growth headwinds.”
As of Q2 2024, 108 hedge funds out of the total number we tracked held stakes in the stock with Fisher Asset Management being the largest one of these with shares worth $1,421,748,082. The stock holds a Strong Buy rating. 17 Wall Street analysts set a 12-month average price target of $658.94 for Thermo Fisher, with forecasts ranging from $600.00 to $767.00, indicating a potential 9.86% increase from the current price of $599.78.
1. UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Fund Holders: 114
UnitedHealth Group Incorporated (NYSE:UNH), based in Minnetonka, Minnesota, is a leading U.S. multinational focused on managed healthcare and insurance, operating through four segments: UnitedHealthcare, Optum Health, Optum Insight, and Optum Rx.
Deutsche Bank reiterated its Buy rating on UNH, raising the price target to $632. This follows UnitedHealth’s 6.4% revenue growth to $98.8 billion, despite challenges like a cyberattack and regulatory changes. The company also reduced expenses by $650 million year-over-year.
The Q2 2024 investor letter from Invesco Distributors, Inc. had a comment on UnitedHealth Group Incorporated (NYSE:UNH). This is what it stated:
“UnitedHealth Group Incorporated (NYSE:UNH): Like many managed care providers, United Health has come under pressure from rising medical costs and higher-than-expected utilization. The stock is currently undervalued based on our analysis. We view the company as a high-quality compounder with secular growth opportunities in the managed care segment. The US Presidential election may cause additional near-term uncertainty, but we believe United Health will be able to rebound once pricing and utilization issues normalize.”
Analysts are also bullish on UNH giving it a Strong Buy rating. 21 analysts set a 12-month average price target of $625.39 for UnitedHealth, with estimates ranging from $591.00 to $680.00, indicating a potential 8.76% rise from the current price of $575.00.
“Overall, UNH ranks first among the best medical stocks to buy. While we acknowledge the potential of medical companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GOOGL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.”
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