In this article, we will take a look at 13 high growth healthcare stocks to buy. To skip our analysis of the recent market activity, you can go directly to see the 5 Best High Growth Healthcare Stocks to Buy.
For the purpose of this article, we have defined high growth stocks as stocks that have historically posted significant revenue growth. To identify long-term past growth, we screened for companies with last 5-year average growth rate of more than 25%, and to gauge their consistency of performance even in the recent macroeconomic adversity, we screened for companies with quarter-over-quarter sales growth of more than 25%. The companies that fell in this category, with the exception of a select few, haven’t had a good performance in the past few years following the cooldown of the pandemic hype.
The performance and valuations of growth companies, especially the ones focused on the earlier stages of their business cycle with unstable or negative earnings, generally get severely impacted by the increase in interest rates. From a mathematical point of view, as the potential earnings need to be discounted at a higher cost of capital, the present value gets relatively smaller, which ultimately leads to lower valuations. Several other issues also arise during high interest periods, including increased costs of capital leading to higher costs of goods, higher interest expenses causing damage to the financial health, and investors shifting to less riskier assets such as bonds and treasuries as they offer better returns.
After a dovish pivot from the Federal Reserve earlier this month, U.S. stocks have rallied significantly. Major U.S. stocks indices such as the S&P 500 have gone up 24.3% while NASDAQ Composite Index and the Dow Jones Industrial Average Index have gone up 44.3% and 12.8%, respectively, year-to-date as of December 22. The healthcare sector has also made a resurgence as evident from the performance of the S&P 500 Healthcare Index which has gone up by 9.83% during the last 8 weeks to end up with a -0.75% year-to-date return.
The M&A activity in the biotech industry, a major industry in the healthcare sector, is picking up pace once again after a dismal performance last year. It has been a relatively strong year for the pharmaceutical and life sciences sectors with both deal value and volume of M&A close to pre-pandemic levels, according to PwC’s latest analysis. These sectors combined registered $222 billion worth of M&A deals during the twelve months ended November 16, 2023.
Some of the biggest transactions announced or closed during the period including Pfizer Inc. (NYSE:PFE) agreement to acquire Seagen Inc. (NASDAQ:SGEN) in a $43 billion transaction, acquisition of Prometheus Biosciences, Inc. (NASDAQ:RXDX) by Merck & Co., Inc. (NYSE:MRK) for $10.8 billion, and AbbVie Inc. (NYSE:ABBV) agreement to acquire Cerevel Therapeutics (NASDAQ:CERE) for nearly $8.7 billion, among others. You can read more about this here.
A doctor in a white coat discussing clinical trial results with a patient in an oncology practice.
Methodology
For this article we used the Finviz stock screener to identify healthcare companies with over 25% quarter-over-quarter sales growth and over 25% sales growth over the past five years. We sorted the resultant dataset in descending order of the market cap and picked the top 13 stocks trading on US stock exchanges. We have also mentioned hedge fund ownership data for each stock.
Data from around 900 elite hedge funds tracked by Insider Monkey in the third quarter of 2023 was used to identify the number of hedge funds that hold stakes in each firm. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
13. ShockWave Medical, Inc. (NASDAQ:SWAV)
Number of Hedge Fund Holders: 34
Santa Clara, California-based ShockWave Medical, Inc. (NASDAQ:SWAV) is a medical device company focused on developing and commercializing products intended to transform the way calcified cardiovascular disease is treated.
On November 6, ShockWave Medical, Inc. (NASDAQ:SWAV) released its financial results for Q3 2023. Its revenue increased by 42% y-o-y to $186 million while its net income remained nearly constant y-o-y at $35 million. It generated a normalized EPS of $92 which surpassed the consensus estimates by $0.18.
As of Q3 2023, ShockWave Medical, Inc. (NASDAQ:SWAV) shares were owned by 34 hedge funds with a total value of $499 million according to the Insider Monkey database.
Artisan Partners, an investment management company, made the following comments about ShockWave Medical, Inc. (NASDAQ:SWAV) in its “Artisan Small Cap Fund” Q3 2023 investor letter:
“Shockwave is a medical device company developing and commercializing products for calcified cardiovascular disease. The company is a leader in using miniaturized lithotripsy (soundwave) technology to break up heavy calcification in arteries, enabling safer and more effective treatment of cardiovascular disease. Shockwave devices are increasingly being used in both coronary artery and peripheral artery indications, and we see significant room for continued growth in these areas. Meanwhile, the company continues to invest in new products to extend the usefulness of intravenous lithotripsy in other indications, and it is making long-term plans to introduce a novel therapy for refractory angina. Unlike some high growth medical device franchises, Shockwave is already profitable, and we expect its strong top-line growth to support margin expansion. However, despite the positive product cycle momentum, the stock’s recent performance tells a different story. The market appears concerned that the rapid growth of GLP-1 diabetes/obesity drugs will reduce demand for cardiovascular disease management technologies. However, we think the public health benefits of obesity therapies, while real, are unlikely to materially restrain Shockwave’s growth opportunities for many years to come, and we remain invested.”
12. BridgeBio Pharma, Inc. (NASDAQ:BBIO)
Number of Hedge Fund Holders: 41
Palo Alto, California-based BridgeBio Pharma, Inc. (NASDAQ:BBIO) is a commercial-stage biopharmaceutical company founded to discover, create, test, and deliver transformative medicines to treat patients who suffer from genetic diseases and cancers with clear genetic drivers.
On December 5, BridgeBio Pharma, Inc. (NASDAQ:BBIO) announced the submission of an NDA for acoramidis to the U.S. FDA for the treatment of ATTR-CM. The application was based on positive results from the Company’s Phase 3 study designed to evaluate the efficacy and safety of acoramidis.
BridgeBio Pharma, Inc. (NASDAQ:BBIO) shares, worth $1.3 billion, were held by 41 of the 910 prominent hedge funds tracked by Insider Monkey, as of Q3 2023. Andreas Halvorsen’s Viking Global was its largest hedge fund shareholder with ownership of 25.1 million shares valued at $662 million.
11. Natera, Inc. (NASDAQ:NTRA)
Number of Hedge Fund Holders: 49
Austin, Texas-based Natera, Inc. (NASDAQ:NTRA) is a global leader in cell-free DNA (cfDNA) testing with a focus on women’s health, oncology, and organ health. It boasts the most accurate non-invasive prenatal test, the first tumor-specific assay for truly individualized cancer care, and best-in-class rejection assessment for kidney transplantation, among other tests.
On November 8, Natera, Inc. (NASDAQ:NTRA) released its quarterly results for Q3 2023. Its total revenue increased by 27% y-o-y to $268 million, while its net loss declined by 10% y-o-y to $109 million. It reported a normalized EPS of -$0.95 for the quarter, which exceeded the consensus estimates by $0.02.
On December 12, TD Cowen analyst Dan Brennan raised the price target for Natera, Inc. (NASDAQ:NTRA) shares to $87 from $82 and maintained an ‘Outperform’ rating for its shares. The price target represents a potential upside of 43.00% based on the share price on December 22.
As of Q3 2023, 49 hedge funds out of the 910 hedge funds tracked by Insider Monkey were bullish on Natera, Inc. (NASDAQ:NTRA) and held shares valued at $1.2 billion.
10. Roivant Sciences Ltd. (NASDAQ:ROIV)
Number of Hedge Fund Holders: 44
New York-based Roivant Sciences Ltd. (NASDAQ:ROIV) is a commercial-stage biopharmaceutical company focused on accelerating the development and commercialization of medicines. It targets a wide range of diseases including uterine fibroids, endometriosis, prostate cancer, Parkinson’s disease, diabetes, pulmonary arterial hypertension, and multiple rare and fatal pediatric conditions.
On October 23, Roivant Sciences Ltd. (NASDAQ:ROIV) announced entry into a definitive agreement under which Roche Holding AG (OTC:RHHBY) will acquire Telavant Holdings, Inc., owned by Roivant Sciences Ltd. (NASDAQ:ROIV) and Pfizer Inc. (NYSE:PFE) for a purchase price of $7.1 billion and a milestone payment of $150 million.
Roivant Sciences Ltd. (NASDAQ:ROIV) owns 75% of Telavant while Pfizer Inc. (NYSE:PFE) owns the remaining 25%. The agreement includes the development, manufacturing and commercialization rights in the US and Japan for RVT-3101, a novel TL1A directed antibody for people suffering from inflammatory bowel disease, including ulcerative colitis and Crohn’s disease.
As of Q3 2023, 44 of the 910 hedge funds tracked by Insider Monkey were long Roivant Sciences Ltd. (NASDAQ:ROIV) and held shares worth $3.2 billion. Daniel Gold’s QVT Financial held the most shares of the company with ownership of 11.5 million shares valued at $1.3 billion.
9. Sarepta Therapeutics, Inc. (NASDAQ:SRPT)
Number of Hedge Fund Holders: 50
Cambridge, Massachusetts-based Sarepta Therapeutics, Inc. (NASDAQ:SRPT) is a global biotechnology company focused on the development of precision genetic medicine for rare diseases. Driven by its multi-platform precision genetic engine, the company currently has a pipeline of more than 40 programs in various stages of development across Duchenne muscular dystrophy (DMD) and limb-girdle muscular dystrophies (LGMDs), and other rare diseases.
The portfolio of Sarepta Therapeutics, Inc. (NASDAQ:SRPT) includes four FDA approved therapies including ELEVIDYS for treatment of DMD in pediatric patients, EXONDYS 51, VYONDYS 53, and AMONDYS 45.
On October 30, Sarepta Therapeutics, Inc. (NASDAQ:SRPT) announced topline results from its Phase 3 clinical study of ELEVIDYS in patients with DMD between the ages of 4 through 7 years. The company revealed that after 52 weeks, patients who underwent the therapy showed improved motor function in comparison to those who received placebos. Nevertheless, the trial results did not reach statistical significance and ultimately missed the primary objective of the study.
Following the announcement, Sarepta Therapeutics, Inc. (NASDAQ:SRPT) shares went significantly down and several analysts lowered their price targets and ratings for the shares. Morgan Stanley analyst Matthew Harrison lowered the price target to $146 from $183 but maintained an ‘Overweight’ rating for the shares, 54.43% more than the share price on December 22.
8. Medpace Holdings, Inc. (NASDAQ:MEDP)
Number of Hedge Fund Holders: 36
Medpace Holdings, Inc. (NASDAQ:MEDP), based in Cincinnati, Ohio, offers clinical pharmacology and laboratory services including central laboratory, bioanalytical, ECG core lab, and imaging core labs. It employs approximately 5,800 people across 41 countries.
On October 24, following a solid quarterly performance, Baird analyst Eric Coldwell raised the price target on Medpace Holdings, Inc. (NASDAQ:MEDP) shares to $289 from $270 and upgraded the rating from ‘Neutral’ to ‘Overweight’.
As of Q3 2023, Medpace Holdings, Inc. (NASDAQ:MEDP) shares were held by 36 of the 910 hedge funds tracked by Insider Monkey with the total shares held by hedge funds valued at $308 million. Jim Simons’ Renaissance Technologies was its biggest hedge fund shareholder with ownership of 0.26 million shares valued at $63 million.
7. Legend Biotech Corporation (NASDAQ:LEGN)
Number of Hedge Fund Holders: 34
Legend Biotech Corporation (NASDAQ:LEGN), based in Somerset, New Jersey, is a global biotechnology company focused on developing, manufacturing, and commercializing advanced cell therapies across a diverse array of technology platforms, including autologous and allogenic chimeric antigen receptor T-cell and natural killer (NK) cell-based immunotherapy.
On November 13, Legend Biotech Corporation (NASDAQ:LEGN) announced an exclusive, global license agreement with Novartis Pharma AG for certain CAR-T therapies targeting DLL3. Legend Biotech Corporation (NASDAQ:LEGN) will receive a $100 million upfront payment and up to $1.0 billion in milestone payments and tiered royalties.
According to Insider Monkey data on 910 hedge funds, 34 hedge funds held shares of Legend Biotech Corporation (NASDAQ:LEGN), valued at $1.5 billion, as of Q3 2023. Lei Zhang’s Hillhouse Capital Management was the leading hedge fund shareholder of the company with ownership of 6.4 million shares valued at $432 million.
In its Q3 2023 “Baron Opportunity Fund” investor letter, Baron Funds, an investment management company, made the following comments about Legend Biotech Corporation (NASDAQ:LEGN):
“Legend’s lead product is called Carvykti, which is now in the midst of a commercial launch for the treatment of multiple myeloma patients who have second line or more advanced disease. Demand significantly outstrips supply in this approximately 60,000 patient opportunity, as Carvykti has shown best-in-class clinical response rates and offers patients a potential curative one-and-done treatment for their cancer. Partner Johnson & Johnson has already invested about $1 billion into making this cellular therapy possible and investments are expected to continue as the therapy is scaled to what could be a $10 billion to $20 billion revenue opportunity. Given this is a niche market with limited competition, we expect continued strong financial growth from Legend.”
6. Neurocrine Biosciences, Inc. (NASDAQ:NBIX)
Number of Hedge Fund Holders: 55
San Diego, California-based Neurocrine Biosciences, Inc. (NASDAQ:NBIX) is a leading neuroscience-focused, biopharmaceutical company focused on discovering and developing life-changing treatments for patients with under-addressed neurological, neuroendocrine, and neuropsychiatric disorders.
The portfolio of Neurocrine Biosciences, Inc. (NASDAQ:NBIX) includes FDA-approved treatments for tardive dyskinesia, chorea associated with Huntington’s disease, Parkinson’s disease, endometriosis, and uterine fibroids.
On October 31, Neurocrine Biosciences, Inc. (NASDAQ:NBIX) released its financial results for Q3 2023. Its revenue increased by 29% y-o-y to $499 million, while it generated a net income of $83 million. The company also increased its INGREZZA (valbenazine) net product sales guidance for 2023 to $1.82 – $1.84 billion.
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Disclosure: None. 13 High Growth Healthcare Stocks to Buy is originally published on Insider Monkey.