In this article, we will be taking a look at 10 oversold healthcare stocks to invest in.
The Promising Outlook for Healthcare Investments in 2024
Investing in healthcare stocks during lean economic times is generally regarded as defensive. This is because people typically do not cut back on their use of prescription medications or other essential healthcare services, even during difficult financial times. According to the Centers for Medicare and Medicaid Services (CMS), national healthcare spending is projected to reach an estimated $4.8 trillion in 2023 and grow at an annual rate of 5.6% between 2027 and 2032.
In the US, the healthcare sector is flourishing. According to a recent estimate, the country’s healthcare spending increased by 7.5% in 2023, above the nominal GDP growth rate for the same year. A record 93.1% of Americans now have health insurance, which helped fuel last year’s sharp increase in healthcare spending. The United States’ national healthcare spending is expected to increase at an average rate of 5.6% between 2023 and 2032, above the 4.3% growth predicted for GDP.
Additionally, the industry is growing quickly on a global scale. According to recent McKinsey projections, healthcare profits would increase at a compound annual growth rate (CAGR) of 7% from $583 billion in 2022 to over $800 billion by 2027. Although labor shortages and rising inflation rates continued to put pressure on the business in 2023, a good risk-reward climate in the sector is expected to make 2024 a year of recovery. According to the American investment firm, the events of 2023 have produced an alluring opportunity for investors to engage in the healthcare industry.
Investments in AI within the healthcare sector have grown rapidly, outpacing the tech industry, with $2.8 billion invested in AI healthcare corporations in 2024, and over $11 billion expected by the end of the year. According to a Silicon Valley Bank report, one-quarter of healthcare spending now goes to AI-driven companies. Deloitte’s 2024 Global Health Care Sector Outlook highlights high investor confidence, with $31.5 billion in private equity funding between 2019 and 2022. AI is expected to save $360 billion in U.S. healthcare over the next five years by improving patient care, diagnosis, treatment, and medical administration.
Optimism in the healthcare industry is growing as 2024 goes on. Financial experts anticipate better earnings this year despite 2023’s poor performance. The healthcare industry has a “favorable risk-reward environment,” according to BlackRock’s 2024 prediction, which also notes that investors now have an appealing starting point because of last year’s poor performance. In view of this, we will take a look at oversold stocks from the healthcare sector.
A robotic arm picking up a product assembly line, displaying the company’s consumer healthcare and wellness offerings.
Our Methodology
For our methodology, we used a stock screener and selected healthcare stocks that had an RSI below 30, mid-market cap, and high institutional ownership. Then we ranked the stocks based on their total number of hedge fund holders as of Insider Monkey’s database of Q3 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 oversold healthcare stocks to invest in.
10. 4D Molecular Therapeutics, Inc. (NASDAQ:FDMT)
Number of Hedge Fund Holders: 24
4D Molecular Therapeutics, Inc. (NASDAQ:FDMT) is a clinical-stage biopharmaceutical company that specializes in gene therapy products for serious unmet medical conditions. The company develops customized gene delivery vehicles, or vectors, to transport therapeutic genetic material into specific cells. Its main focus areas include treatments for ophthalmology, pulmonology, and cardiology.
The company’s lead candidate, 4D-150 for wet AMD, has shown promising results in Phase 1/2 trials. Interim data demonstrated a robust and durable reduction in anti-VEGF injection treatment burden, with an overall reduction of 83% in the severe population
As of September 30, 2024, 4D Molecular Therapeutics, Inc. (NASDAQ:FDMT) reported $551 million in cash, cash equivalents, and marketable securities, which is expected to fund planned operations at least into the first half of 2027. This strong cash position provides a significant runway for the company to advance its clinical programs. The company’s revenue for Q3 2024 was $3,000, a substantial decrease from $20.2 million in Q3 2023. This decline is likely due to the completion of certain collaboration agreements or milestone payments in the previous year. Research and development expenses increased to $38.5 million in Q3 2024 from $25.1 million in Q3 2023, reflecting the progression of clinical trials, particularly for 4D-150 in wet AMD and DME.
4D Molecular Therapeutics, Inc. (NASDAQ:FDMT) has several anticipated milestones in early 2025 that could act as key catalysts for its stock. These include the release of 52-week interim data from the Phase 2b cohort of the PRISM clinical trial for 4D-150 in wet AMD in February 2025 and the initiation of the 4FRONT-1 Phase 3 clinical trial for the same condition in Q1 2025. Additionally, interim data updates from the SPECTRA clinical trial program for 4D-150 in diabetic macular edema (DME) are expected in early January 2025, alongside the planned Phase 1 enrollment for 4D-175 in geographic atrophy, also in Q1 2025.
As tracked by the Insider Monkey database, 24 hedge fund holders held shares in 4D Molecular Therapeutics, Inc. (NASDAQ:FDMT) in Q3 2024, with Biotechnology Value Fund / BVF Inc being the largest stakeholder with shares worth roughly $80 million. Street analysts hold a consensus Strong Buy rating on the stock.
9. Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP)
Number of Hedge Fund Holders: 25
Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP) is a clinical-stage biopharmaceutical company focused on developing therapies for oncology and fibrotic diseases. It specializes in precision oncology, with two key experimental drugs in its pipeline: CRB-701, an antibody-drug conjugate targeting Nectin-4 on cancer cells, and CRB-601, an anti-integrin monoclonal antibody that blocks TGFβ activation in cancer cells. Corbus generates revenue through partnerships, including a licensing agreement with CSPC Pharmaceutical Group for CRB-701, which includes upfront payments, milestones, and royalties. It is one of the best oversold stocks on our list.
At the ASCO 2024 conference, Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP) reported promising results for CRB-701, showing an Overall Response Rate (ORR) of 44% in metastatic urothelial cancer and 43% in cervical cancer patients. The Disease Control Rate (DCR) was even higher, at 78% for bladder cancer and 86% for cervical cancer, indicating significant tumor shrinkage or stabilization.
As of Q3 2024, 25 hedge funds in the Insider Monkey database held shares in Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP), and out of these hedge fund holders, the largest stakeholder of the company was Cormorant Asset Management with shares worth $48.9 million. Street analysts hold a consensus Strong Buy rating on the stock. Analysts have given 12-month price targets for Corbus Pharmaceuticals, with an average target of $80.67, a high of $88.00, and a low of $73.00. This represents a 333.01% increase from the current price of $18.63.
8. Organon & Co. (NYSE:OGN)
Number of Hedge Fund Holders: 32
Organon & Co. (NYSE:OGN) is a global healthcare company focused on women’s health, biosimilars, and established brands. Its product portfolio includes prescription medicines for reproductive health, contraception, menopause management, fertility treatments, and therapies for osteoporosis and endometriosis. The company also develops biosimilars and maintains a range of established pharmaceutical brands. OGN ranks eighth on our list of the best oversold stocks from the healthcare sector.
Organon & Co. (NYSE:OGN) delivered strong results in the third quarter of 2024, with revenue reaching $1.582 billion, marking a 4% increase as reported and 5% at constant currency compared to the previous year. This growth was fueled by a 5% rise in Women’s Health revenue (6% excluding foreign exchange effects), a 16% increase in Biosimilars revenue (17% at constant currency), and a 2% rise in Established Brands revenue (3% at constant currency). Notably, the company’s flagship product, Nexplanon, is on track to achieve $1 billion in revenue next year, underscoring its robust market demand and growth potential.
Organon & Co. (NYSE:OGN)’s profitability showed mixed results in Q3 2024. While gross margins declined slightly to 58.3% as reported (61.7% non-GAAP adjusted), net income surged to $359 million ($1.38 per diluted share), up from $58 million ($0.23 per share) in Q3 2023. Adjusted EBITDA margin dipped slightly to 29.0% from 29.4%, impacted by $51 million in IPR&D expenses.
As of Q3 2024, 32 hedge funds in Insider Monkey’s database held shares in the company. The largest stakeholder was Citadel Investment Group with shares worth over $55 million. Eight Wall Street analysts set a 12-month average price target of $21.17 for Organon, with a high of $27.00 and a low of $16.00. This represents a 20.01% increase from the current price of $17.64.
