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.
7. Tandem Diabetes Care, Inc. (NASDAQ:TNDM)
Number of Hedge Fund Holders: 33
Tandem Diabetes Care, Inc. (NASDAQ:TNDM) is a medical device company specializing in insulin delivery systems for people with insulin-dependent diabetes. Tandem is positioned for growth through several key strategies. The launch of the Mobi insulin pump, the smallest automated insulin delivery system, is expected to drive new patient adoption and increase market share. TNDM is one of the best oversold stocks in the healthcare sector.
Tandem Diabetes Care, Inc. (NASDAQ:TNDM) is expanding its presence in international markets, opening new revenue streams and growth opportunities. Targeting the Type 2 diabetes market, Tandem aims to file for a Type 2 diabetes indication by the end of 2024. Moreover, the integration with Abbott’s FreeStyle Libre 3+ sensor is set to enhance its product offerings and attract more users.
Tandem Diabetes Care, Inc. (NASDAQ:TNDM) reported strong earnings in Q3 2024, driven by solid performance across its product portfolio, particularly the newly launched Tandem Mobi. Sales reached $243 million, reflecting a 23% year-over-year growth in the U.S. market, fueled by increased adoption of insulin pumps and strategic pricing improvements. While the company reported a negative EPS of $-0.36, it surpassed market expectations of $-0.40 and returned to positive free cash flow generation, signaling improved financial health.
As of Q3 2024, 33 hedge funds in the Insider Monkey database held shares in the stock, down from 31 in the previous quarter, as tracked by the Insider Monkey database. The largest stakeholder in the company in Q3 was Millennium Management with shares worth $60.8 million. Street analysts hold a consensus Strong Buy rating on the stock.
6. Moderna, Inc. (NASDAQ:MRNA)
Number of Hedge Fund Holders: 34
Moderna, Inc. (NASDAQ:MRNA) is a biotechnology company specializing in messenger RNA (mRNA) therapeutics and vaccines. It creates synthetic mRNA to instruct cells to produce proteins for preventing or treating various diseases, focusing on mRNA-based solutions for infectious diseases, immuno-oncology, rare diseases, and autoimmune disorders.
Moderna, Inc. (NASDAQ:MRNA) plans to file for approval of three new products this year: a new COVID/flu vaccine, a next-generation COVID-19 vaccine, and an RSV vaccine for adults aged 18-59. While the RSV vaccine rollout and positive EMA opinion boost investor confidence, the company also reports positive Phase III results for the flu/COVID-19 combo vaccine and partnerships with BARDA and Mitsubishi Tanabe Pharma. To save $1.1 billion annually by 2027, Moderna will discontinue five R&D programs and aims for operational breakeven by 2028, while continuing to advance clinical trials for mRNA-1647 and mRNA-3705.
In Q3 2024, Moderna, Inc. (NASDAQ:MRNA) reported an EPS of $0.03, and achieved a net income of $13 million, reversing a $3.6 billion loss in Q3 2023. The company’s revenue reached $1.9 billion, driven by strong COVID-19 vaccine sales following U.S. regulatory approval of its updated vaccine. The company reduced operating expenses by $500 million year-over-year through improved productivity and cost efficiencies in manufacturing, R&D, and SG&A. Additionally, the cost of sales dropped 77% to $514 million, reflecting strategic restructuring and lower inventory write-downs, enhancing profitability.
Baron Health Care Fund made the following comment about Moderna, Inc. (NASDAQ:MRNA) in its Q1 2023 investor letter:
“Moderna, Inc. (NASDAQ:MRNA) is a leader in the emerging field of mRNA-based vaccines and therapeutics and was one of the three main producers of the COVID-19 vaccine. Shares fell during the quarter. We believe as COVID shifts away from pandemic status and becomes an increasingly commercial market (rather than government-funded), there is increasing investor uncertainty around what a booster market could look like, which is pressuring shares. Looking beyond COVID, we think Moderna has the potential to disrupt the biopharmaceutical industry, from infectious disease vaccines to oncology, and we remain shareholders.”
5. Molina Healthcare, Inc. (NYSE:MOH)
Number of Hedge Fund Holders: 37
Molina Healthcare, Inc. (NYSE:MOH), founded in 1980 by Dr. C. David Molina, is a managed care company that provides health insurance primarily through government programs like Medicaid and Medicare. Originally a single clinic in Long Beach, California, aimed at serving low-income patients, Molina now operates in 19 states and serves over 5.1 million members.
Molina Healthcare (NYSE: MOH) emerges as one of the best oversold stocks with substantial growth potential. In Q3 2024, the company reported strong financial performance, with adjusted EPS of $6.01 and premium revenue of $9.7 billion, reaffirming its 2024 guidance of approximately $38 billion in premium revenue and at least $23.50 in EPS, representing 17% and 13% year-over-year growth, respectively. Key metrics included a Q3 adjusted pre-tax margin of 4.5%, a year-to-date consolidated MCR of 88.8%, and an adjusted G&A ratio of 6.4%.
Supported by a solid balance sheet with a 35% debt-to-capital ratio and debt at 1.4 times trailing 12-month EBITDA, Molina Healthcare, Inc. (NYSE:MOH) is well-positioned for long-term growth across Medicaid, Medicare, and Marketplace segments. Strategic initiatives, including retaining the Florida contract, potential expansion in Georgia, and competitive rate filings for 2025, further bolster the company’s growth outlook. The company anticipates $1 billion in incremental premium revenue by 2027 from its Michigan contract and $400 million within three years from its Massachusetts contract.
Additionally, back in June, Molina Healthcare Inc. (NYSE:MOH) acquired ConnectiCare, a top Connecticut health plan, as part of its strategic growth objectives. With the addition of a well-known brand and a statewide provider network, this acquisition, which covers 140,000 members across Marketplace, Medicare, and certain commercial programs, improves Molina’s standing.
As of Q3 2024, 37 hedge funds in the Insider Monkey database held shares in the company. The largest stakeholder in the company was Durable Capital Partners with shares worth $361.4 million.
4. Elanco Animal Health Incorporated (NYSE:ELAN)
Number of Hedge Fund Holders: 42
Elanco Animal Health Incorporated (NYSE:ELAN) is a global leader in animal health solutions, developing products and services to prevent and treat diseases in farm animals and pets. Operating in over 90 countries, the company offers a wide range of products, including parasiticides, vaccines, and therapeutics for companion animals and livestock.
Elanco Animal Health Incorporated (NYSE:ELAN) reported Q3 2024 revenue of $1.03 billion, reflecting a 4% decline from the previous year. However, excluding the divestiture of their Aqua business and foreign exchange impacts, organic constant currency revenue grew by 1%. The company exceeded earnings expectations with an EPS of $0.13, surpassing the forecast of $0.12. Elanco also made significant progress in debt management, paying down $1.3 billion in debt and reducing its net leverage from mid-five times to mid-four times. Elanco Animal Health Incorporated (NYSE:ELAN)’s growth was driven by new products like Zenrelia and Credelio Quattro, particularly in the pet health sector, while the U.S. farm animal business saw an 11% revenue increase, primarily driven by cattle products such as Experior.
As of Q3 2024, 42 hedge funds in the Insider Monkey database held shares in Elanco Animal Health Incorporated (NYSE:ELAN). The largest stakeholder in the company was Magnetar Capital with over 10.5 million shares worth $155.4 million. The stock holds a Moderate Buy rating. Seven Wall Street analysts have set a 12-month price target for Elanco Animal Health, with an average target of $18.67, reflecting a potential 45.52% increase from its current price of $12.83. The forecasts range from a low of $15.00 to a high of $22.00.
3. Acadia Healthcare Company, Inc. (NASDAQ:ACHC)
Number of Hedge Fund Holders: 43
Acadia Healthcare Company, Inc. (NASDAQ:ACHC) is a top provider of behavioral health and addiction treatment services in the U.S. and Puerto Rico, operating 258 treatment facilities across 38 states. The company offers a wide range of services, including inpatient, residential, and outpatient care for individuals of all ages facing mental health disorders and addiction issues. The stock ranks third on our list of the best oversold stocks from the healthcare sector.
Acadia Healthcare Company, Inc. (NASDAQ:ACHC)’s recent acquisition of three Comprehensive Treatment Centers (CTCs) in North Carolina enhances its presence in the opioid addiction treatment market. Additionally, U.S. government reforms aimed at extending non-restrictive insurance coverage for addiction and behavioral healthcare could boost Acadia’s revenue starting January 2025. The company is also investing $100 million in technology to improve operational efficiency and patient care outcomes.
Acadia Healthcare Company, Inc. (NASDAQ:ACHC) reported strong financial performance in Q3 2024, with total revenue of $816 million, an 8.7% year-over-year increase. Same-facility revenue grew by 8.6%, while adjusted EBITDA rose 10.5% to $194.3 million, reflecting an adjusted EBITDA margin expansion of 40 basis points to 23.8%. The growth was driven by a 4.7% increase in same-facility patient days and a 3.6% rise in revenue per patient day, showcasing Acadia’s ability to attract more patients and improve pricing power. The behavioral health market presents a significant opportunity for the company, as more than one in five Americans live with a mental illness, and one in three with serious mental illness receives no treatment. With 40% fewer psychiatric beds per capita than comparable countries and an estimated need for 75,000 additional beds, Acadia Healthcare Company, Inc. (NASDAQ:ACHC) is well-positioned to address this demand, planning to invest billions of dollars and add over 2,000 beds in the next two years.
As tracked by the Insider Monkey database, 43 hedge fund holders held stakes in the company in Q2 2024, with Viking Global being the largest stakeholder with shares worth $234.7 million. The stock holds a Moderate Buy rating.
2. Centene Corporation (NYSE:CNC)
Number of Hedge Fund Holders: 51
Centene Corporation (NYSE:CNC) is a prominent healthcare enterprise specializing in managed care services, primarily through government-sponsored healthcare programs. The company provides health insurance plans and solutions for individuals and families, focusing on Medicaid, Medicare, and commercial products.
Centene Corporation (NYSE: CNC) also stands out as one of the best oversold stocks in the healthcare sector with significant growth potential. The company reported strong Q3 2024 results, beating earnings expectations with an EPS of $1.62, surpassing the anticipated $1.35. Centene remains on track to deliver adjusted diluted EPS exceeding $6.80 for the full year 2024. Its financial strength is reflected in Q3 premium and service revenue of $36.9 billion and a year-to-date consolidated Health Benefits Ratio (HBR) of 87.9%. The company’s diverse portfolio has helped it navigate challenges, with Medicaid membership stabilizing at around 13 million, Marketplace membership growing by 22% year-over-year to 4.5 million, and the Medicare segment performing in line with expectations.
As of Q3 2024, 51 hedge funds in the Insider Monkey database held shares in Centene Corporation (NYSE:CNC). Street analysts hold a consensus Strong Buy rating on the stocks. Analysts have set a 12-month price target for Centene, averaging $87.36, with a high of $97.00 and a low of $72.00. This average indicates a 38.67% increase from the current price of $63.00.
1. Elevance Health, Inc. (NYSE:ELV)
Number of Hedge Fund Holders: 67
Elevance Health, Inc. (NYSE: ELV) is a leading health insurance provider in the U.S., offering health insurance plans and related services to individuals, employers, and government programs like Medicare and Medicaid. The company generates revenue by collecting premiums and managing healthcare costs through its provider network, serving approximately 117 million people across various health plans and services. ELV tops our list of the best oversold stocks in the healthcare sector.
Despite challenges in Q3 2024, Elevance Health, Inc. (NYSE: ELV) reported strong financial fundamentals, with total operating revenue of $44.7 billion (up 5% year-over-year) and adjusted diluted earnings per share of $8.37. However, the company faced elevated medical costs in its Medicaid business, leading to a revised full-year 2024 outlook of approximately $33 adjusted diluted EPS. Looking ahead, the company expects strong revenue growth in 2025, projecting high single-digit percentage increases and at least 12% annual growth in adjusted diluted EPS. The company is expanding strategically with plans to enter three new states for individual exchange offerings, acquire Kroger Specialty Pharmacy, and expand its individual and family ACA plans in Florida, Maryland, and Texas.
On October 1, Elevance announced its 2025 Medicare Advantage Plans, offering flexible options with personalized benefits to nearly 40.3 million eligible consumers in 23 states. The company’s affiliated health plans currently serve 2.9 million Medicare members, and in 2025, Elevance aims to provide personalized care beyond healthcare.
Artisan Partners’ Artisan Select Equity Fund stated the following regarding Elevance Health, Inc. (NYSE:ELV) in its Q2 2024 investor letter:
“The top contributors to performance for the quarter were Alphabet, Lam Research, and Elevance Health, Inc. (NYSE:ELV). Elevance shares rose 5% during the quarter. The business has been performing well and has delivered good profit growth this year, despite a flat top line. It has largely navigated the challenges related to Medicaid redeterminations, which have caused temporary volatility in membership and healthcare utilization levels. Its vertical integration strategy is gaining traction, with strong revenue and profit growth at its Carelon Services business. Elevance’s shares are trading at 13X earnings, which is a very attractive investment proposition for a durable business that expects long-term earnings growth of over 12%.”
Overall, ELV ranks first among the 10 oversold healthcare stocks to invest in. While we acknowledge the potential of healthcare 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 ELV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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