10 Oversold Healthcare Stocks to Buy

Published on August 12, 2023 at 11:05 am by Muhammad Jamal Akbar in Hedge Funds, Lists

In this article, we will take a look at the 10 healthcare stocks to buy. To skip our analysis of the recent trends, and market activity, you can go directly to see the 5 Oversold Healthcare Stocks to Buy.

Companies in the healthcare sector were among the biggest beneficiaries of the coronavirus pandemic with the introduction of several vaccines and other therapies to combat the devastating effects of the virus. With a major portion of the global populace now vaccinated against Covid viruses, the positive additions to the revenue for healthcare companies is finally blowing over. Despite that, the sector hasn’t lost its importance and is poised for further growth in the future.

The S&P 500 Health Care Index, which tracks the performance of healthcare companies included in the S&P 500 Index, has lost nearly 1.0% of its value year-to-date, as compared to a 16.39% growth for the S&P 500 Index.

The decline in healthcare stock prices can be attributed to multiple factors including the global macroeconomic environment, slowdown in the initial public offering (IPO) markets, as well as a decline in M&A activity across the industry. During the first five months of 2023, pharmaceutical and biotech companies spent $85 billion on acquisitions, compared to a measly $35.6 billion in the same period of 2022. Even though the industry has faced challenges in the recent past, there is potential for a significant recovery in the upcoming months. You can more this here: 10 Oversold Biotech Stocks to Buy

Key areas of focus in the healthcare sector include the biotechnology area which is focusing on the research and development of novel therapies for the treatment and management of rare diseases. The biotechnology area has seen major discoveries in the recent past which has raised the potential for significant breakthroughs.

Another key area of focus in the healthcare sector is the medical devices space which is expected to benefit from the artificial intelligence boom as well as other recent technological developments. Our list includes some of the leading medical devices companies such as Zimmer Biomet Holdings, Inc. (NYSE:ZBH), Penumbra, Inc. (NYSE:PEN), and ResMed Inc. (NYSE:RMD), among others. You can read more about this in our recent article: 11 Best Healthcare Stocks Under $50

Majority of the companies on our list of 10 oversold healthcare stocks to buy are clinical-stage biotechnology companies working on the development of novel therapeutics for rare diseases. The list includes Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), Vir Biotechnology, Inc. (NASDAQ:VIR), Karuna Therapeutics, Inc. (NASDAQ:KRTX), and ResMed Inc. (NYSE:RMD), among others.

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Methodology

For this article, we compiled a list of 10 healthcare stocks with the lowest 14-day Relative Strength Index (RSI) as of August 4. We only chose the stocks that have market capitalizations of more than $1.0 billion as shares of companies with low market capitalization are susceptible to high volatility.

The Relative Strength Index is a technical indicator that tracks momentum changes in stock prices. It was developed by J. Welles Wilder, and it is calculated by determining the mean of gains and losses of a stock in the last 14 days. An RSI above 70 implies that a stock is overbought and below 30 implies that it is oversold. These levels can be adjusted if needed. The stocks in this article are listed in descending order of their RSI.

Oversold Healthcare Stocks to Buy

10. Vir Biotechnology, Inc. (NASDAQ:VIR)

14-day RSI as of August 4: 23.18

Number of Hedge Fund Holders: 22

San Francisco, California-based Vir Biotechnology, Inc. (NASDAQ:VIR) is a commercial-stage immunology company focused on the development of therapies to treat and prevent serious infectious diseases. Its current development pipeline consists of product candidates targeting COVID-19, hepatitis B and D viruses, influenza A and human immunodeficiency virus.

On July 20, Vir Biotechnology, Inc. (NASDAQ:VIR) announced that the Phase 2 Prevention of Illness Due to Influenza A (PENINSULA) trial evaluating VIR-2482 for the prevention of symptomatic influenza A illness did not meet primary or secondary efficacy endpoints.

Following the announcement, Barclays lowered the price target for Vir Biotechnology, Inc. (NASDAQ:VIR) shares to $41 from $59 while maintaining an ‘Overweight’ rating. The price target represents a potential upside of 250.25% based on the share price on July 25.

As of Q1 2023, Vir Biotechnology, Inc. (NASDAQ:VIR) shares were owned by 22 of the 943 hedge funds tracked by Insider Monkey, with a total value of $161 million. Notable hedge fund investors included Point72 Asset Management, Avidity Partners Management, and Renaissance Technologies, among others.

9. Zimmer Biomet Holdings, Inc. (NYSE:ZBH)

14-day RSI as of August 4: 22.96

Number of Hedge Fund Holders: 51

Warsaw, Indiana-based Zimmer Biomet Holdings, Inc. (NYSE:ZBH) is a leading global medical technology company that designs, manufactures, and markets orthopedic reconstructive products; sports medicine, biologics, extremities, and trauma products; craniomaxillofacial and thoracic products; surgical products; and a suite of integrated digital and robotic technologies.

On August 1, Zimmer Biomet Holdings, Inc. (NYSE:ZBH) released its financial results for Q2 2023. Its revenue increased by 5% y-o-y to $1.9 billion while net income surged by 36% y-o-y to $210 million. The company also raised its revenue change guidance for FY 2023 to 6.5% – 7.0% from 5.0% – 6.0%.

Following the earnings release, JMP Securities reiterated a ‘Market Outperform’ rating and a target price of $160 for Zimmer Biomet Holdings, Inc. (NYSE:ZBH) shares.

8. Karuna Therapeutics, Inc. (NASDAQ:KRTX)

14-day RSI as of August 4: 22.87

Number of Hedge Fund Holders: 33

Boston, Massachusetts-based Karuna Therapeutics, Inc. (NASDAQ:KRTX) is a clinical-stage biopharmaceutical company focused on the research and development of transformative medicines for people living with psychiatric and neurological conditions.

KarXT, the lead drug candidate of Karuna Therapeutics, Inc. (NASDAQ:KRTX), is being evaluated in Phase 3 clinical trials as a potential treatment for schizophrenia, as well as for psychosis in Alzheimer’s disease. The company expects to submit a new drug application (NDA) for KarXT in schizophrenia with FDA in Q3 2023 with a potential product launch in H2 2024, subject to an approval from the authority.

As of June 30, Karuna Therapeutics, Inc. (NASDAQ:KRTX) had cash, cash equivalents and investments of $1.4 billion which is expected to fund the operations of the company through 2026. This includes net proceeds of $436.7 million generated through a follow-on public offering of the company’s shares in March 2023.

7. Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE)

14-day RSI as of August 4: 21.05

Number of Hedge Fund Holders: 29

Novato, California-based Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) is a biopharmaceutical company focused on the development of novel products for the treatment of serious rare and ultra-rare genetic diseases.

The portfolio of Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) includes four commercial products: DOJOLVI® for patients with molecularly confirmed long-chain fatty acid oxidation disorders, MEPSEVII® for Mucopolysaccharidosis VII, CRYSVITA® for hypophosphatemic disorders, and EVKEEZA® for Homozygous Familial Hypercholesterolemia.

On August 3, Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) released its financial results for Q2 2023. Its revenue increased by 21% y-o-y to $108 million while net loss remained nearly constant y-o-y at $160 million.

Following the earnings release, Morgan Stanley reiterated a price target of $95 for Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) and maintained an ‘Overweight’ rating for the shares. The target price represents a potential upside of 154.84% based on the share price on August 4.

6. TG Therapeutics, Inc. (NASDAQ:TGTX)

14-day RSI as of August 4: 20.69

Number of Hedge Fund Holders: 23

TG Therapeutics, Inc. (NASDAQ:TGTX) is a biopharmaceutical company focused on the acquisition, development, and commercialization of novel treatments for B-cell diseases. Its research pipeline includes several investigational medicines targeting B-cell diseases.

The portfolio of TG Therapeutics, Inc. (NASDAQ:TGTX) includes one commercial product, BRIUMVI® (ublituximab-xiiy), approved by the FDA for treatment of adult patients with relapsing forms of multiple sclerosis. The drug has also been approved by the European Commission to treat adult patients with RMS.

On August 1, TG Therapeutics, Inc. (NASDAQ:TGTX) announced an ex-US commercialization agreement with Permira backed European specialty pharmaceutical company, Neuraxpharm Group, of BRIUMVI® (ublituximab). The total deal is valued at $645 million in upfront and milestone payments including $140 million upfront payment.

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