15 Best Healthcare Stocks To Buy Now

Published on June 1, 2023 at 10:04 am by Aima Zaheer in Hedge Funds, News

In this article, we will take a look at the 15 best healthcare stocks to buy now. For more stocks, head on over to 5 Best Healthcare Stocks To Buy Now.

In the midst of uncertain economic conditions globally, the healthcare sector has displayed a notable degree of resilience. Historically, the demand for healthcare products and services has proven to be relatively inelastic. The healthcare sector’s strength was evident during the equity downturn experienced in 2022 as well, where the sector outperformed broader equity markets. According to BlackRock, healthcare stocks demonstrated 23% less volatility compared to the overall market during the last year. In the past seven recessions, the healthcare sector has consistently surpassed broad market performance by an average margin of 10%. Furthermore, over the span of the last six recessions, earnings within the industry have experienced an average growth of 21%. Some of the best healthcare stocks in the industry include UnitedHealth Group Incorporated (NYSE:UNH), Johnson & Johnson (NYSE:JNJ), and Horizon Therapeutics Public Limited Company (NASDAQ:HZNP).

Like many other industries, the healthcare sector underwent significant changes due to the COVID-19 pandemic. According to a report released by Deloitte, approximately 70% of the global population received at least one dose of the COVID-19 vaccine during the pandemic. As the global economy returns to the new normal and the COVID-19 pandemic moves towards the endemic stage, the healthcare sector is adapting to new trends to shape its future outlook. One notable shift in the industry is the increasing virtualization of care, which has not only transformed the way healthcare services are delivered but has also attracted new players in the industry. For instance, in 2021, the Mayo Clinic and Kaiser Permanente jointly invested $110 million into Medically Home Group, a venture company focused on hospital-at-home services.

Industry’s Growth Trajectory

The delivery of healthcare services is no longer restricted to healthcare companies only, but leading technology and retail companies are now making a play at it as well. In November 2021, leading electronics retailer Best Buy Co., Inc. (NYSE:BBY) invested $400 million to acquire the care-at-home platform Current Health. Meanwhile, technology giant Apple Inc. (NASDAQ:AAPL) also partnered with Zimmer Biomet to develop remote sensors that could be installed in smartphones and smartwatches and used to track the recovery of patients following their knee replacement surgery. As per Deloitte, the remote monitoring devices segment is expected to gain more mainstream attention as its size is forecasted to increase from $30 billion in 2021 to $101 billion in 2028. This reflects an annual average growth rate of 18.9%.

The overall demand for the healthcare sector can be gauged by the fact that one in three adults across the world has chronic conditions like heart disease, cancer, and diabetes as of 2023. Meanwhile, one in every four individuals is expected to experience a form of mental illness during their life. According to Deloitte, over a period of 20 years, the world is expected to face an economic loss of $16.3 trillion due to mental illnesses. However, despite the rising demand for healthcare services, the sector’s ability to deliver remains constrained due to numerous factors. Around $935 billion, or 25% of the US healthcare expenditure, is wasted due to administrative red tape or inefficiencies, pricing irregularity, and labour shortages. The global healthcare sector is expected to experience a shortage of 12.1 million skilled healthcare professionals by 2035. Experts think an active adoption of technology and virtual delivery systems can help overcome such a significant shortage of healthcare professionals in the near future.

Photo by National Cancer Institute on Unsplash

Our Methodology

We initially compiled an extensive list of companies actively involved in the healthcare sector. Next, we used Insider Monkey’s database of 943 hedge funds as of Q1 2023 to identify the stocks that attracted the highest number of hedge fund investors during the quarter. The best healthcare stocks have been ranked in ascending order of the hedge fund ownership. We have also discussed the analyst ratings and growth prospects of companies to provide our readers with further investment context.

Best Healthcare Stocks To Buy Now

15. Sarepta Therapeutics, Inc. (NASDAQ:SRPT)

Number of Hedge Fund Holders: 57

Sarepta Therapeutics, Inc. (NASDAQ:SRPT) is a Cambridge, Massachusetts-based company founded in 1980 that is involved in the development and commercialization of genetic medicines for the treatment of rare diseases. The company received a positive update from RBC Capital as the Canadian investment bank increased the price target on Sarepta Therapeutics, Inc. (NASDAQ:SRPT) from $197 to $218 in a research note issued to investors on May 16. Analysts anticipate accelerated approval of SRP-9001 gene therapy for Duchenne in the short term following the favourable outcome of the FDA panel vote.

Two Sigma Advisors raised its stake in Sarepta Therapeutics, Inc. (NASDAQ:SRPT) by over 90% during Q1 2023.

14. Gilead Sciences, Inc. (NASDAQ:GILD)

Number of Hedge Fund Holders: 60

On May 16, Gilead Sciences, Inc. (NASDAQ:GILD) was upgraded from a Market Perform to an Outperform rating, and the target price was revised from $90 to $100 by Evan Seigerman at BMO Capital. The analyst highlighted that the Foster City, California-based biopharmaceutical company has the “best-in-class” cell therapy portfolio that is backed by a stellar manufacturing ability. Furthermore, the company is also focused on improving its solid tumour oncology division by bringing Trodelvy into its portfolio by getting the drug’s commercialization rights in the Asian market from Everest Medicines.

Here’s what Ariel Investments said about Gilead Sciences, Inc. (NASDAQ:GILD) in its Q4 2022 investor letter:

“Biopharmaceutical company Gilead Sciences, Inc. (NASDAQ:GILD. advanced in the quarter on positive data released in a study evaluating Trodelvy versus comparative chemotherapy in patients with metastatic breast cancer. The detailed findings increased investor confidence the drug would receive incremental approvals for a broader range of breast cancer treatments. Shares also received a boost on news the TAF patent portfolio for HIV drugs will be extended from the middle of this decade through the early 2030s, creating greater visibility into the company’s long-term opportunity in the virology market.”

13. HCA Healthcare, Inc. (NYSE:HCA)

Number of Hedge Fund Holders: 65

HCA Healthcare, Inc. (NYSE:HCA) is a Nashville, Tennessee-based healthcare services company founded in 1968. The company operates a vast network of hospitals, outpatient centres, and other healthcare facilities across the US and UK. HCA Healthcare, Inc. (NYSE:HCA) is expanding its presence in Texas as it announced the acquisition of 41 urgent care centres from FastMed earlier this month. Presently, the company has 92 urgent care centres along with 45 hospitals and 395 physician practices present in the Lone Star State. HCA Healthcare, Inc. (NYSE:HCA) has made an investment outlay of $6.6 billion in the last six years in the state. HCA Healthcare, Inc. (NYSE:HCA) stock offers an annual forward dividend yield of 0.86% as of May 29.

Renaissance Investment Management shared its stance on HCA Healthcare, Inc. (NYSE:HCA) in its Q4 2022 investor letter. Here’s what the firm said:

“Lastly, HCA Healthcare, Inc. (NYSE:HCA) was another contributor. The company is seeing solid improvements in surgical volumes and overall healthcare usage. Meanwhile, labor expenses, which have weighed heavily on operating margins, appear to be reversing as extra headcount brought on to accommodate spikes in patient volumes due to COVID is finally subsiding.”

12. DexCom, Inc. (NASDAQ:DXCM)

Number of Hedge Fund Holders: 66

DexCom, Inc. (NASDAQ:DXCM) is a San Diego, California-based medical device company founded in 1999 that specializes in the development and manufacturing of continuous glucose monitoring (CGM) systems. Matthew Blackman at Stifel increased the price target on DexCom, Inc. (NASDAQ:DXCM) from $130 to $140 and reiterated a Buy rating on the stock in an investment note issued on April 28. The analyst shared that the company’s Q1 2023 results checked “all the important boxes,” in his opinion.

Baron Funds shared its outlook on DexCom, Inc. (NASDAQ:DXCM) in its Q1 2023 investor letter. Here’s what the firm said:

“We started a position in DexCom, Inc. (NASDAQ:DXCM), a medical device company that sells continuous glucose monitoring (CGM) devices for people with diabetes. DexCom is in the early stages of the launch of its seventh-generation device called the G7, which offers many new features, including 60% smaller size, a disposable transmitter, and 30-minute sensor warmup, among other features. We think the G7 will drive revenue growth acceleration through continued penetration in the core insulin-intensive diabetes population globally. In addition, Medicare recently decided to provide coverage of CGM for people with Type 2 diabetes who are basal insulin users, meaning people with diabetes who use insulin daily but don’t need to use insulin intensively at every meal or multiple times daily. This expanded coverage adds millions of people to DexCom’s addressable market. Over the long term, we believe DexCom will have an opportunity to expand into the even larger category of non-insulin users with Type 2 diabetes given the benefits of CGM in helping all people manage their diabetes.”

11. Intuitive Surgical, Inc. (NASDAQ:ISRG)

Number of Hedge Fund Holders: 67

On May 18, Richard Newitter at Truist raised the price target on Intuitive Surgical, Inc. (NASDAQ:ISRG) from $325 to $347 and maintained a Buy rating on the stock. In April 2023, the stock price of the Sunnyvale, California-based robotic surgical system producer recorded the highest increase in three years following the release of the company’s Q1 2023 results. Intuitive Surgical, Inc. (NASDAQ:ISRG) saw its revenue increase by 13.4% YoY to $1.69 billion, outperforming the consensus forecast of $1.68 billion. Meanwhile, the adjusted EPS was posted at $1.23 and was three cents higher than analysts’ forecast.

Here’s what RiverPark Advisors said about Intuitive Surgical, Inc. (NASDAQ:ISRG) in its Q1 2023 investor letter:

“Intuitive Surgical, Inc. (NASDAQ:ISRG): ISRG shares were a top detractor in the quarter despite 4Q results largely in line with expectations. The company used the quarterly release to define the timeline of upcoming products including its next-gen platform, now expected next year. The market was disappointed by this timing.

Intuitive is the pioneer and clear leader in robotic surgery and remains one of our most compelling long-term growth opportunities. The company’s products address a massive market with very low current penetration, and the company has a strong moat. Its major competitors, J&J and Medtronic, are facing large delays (to at least 2024) in introducing their platforms as the FDA approval process has become more difficult. These delays give Intuitive more time to place systems, train surgeons and launch new products, extending its competitive advantage. The company’s “Extended Use Program” aims to make its tools more price-competitive to traditional non-robotic procedures, which increases the company’s moat.”

10. Biogen Inc. (NASDAQ:BIIB)

Number of Hedge Fund Holders: 67

Biogen Inc. (NASDAQ:BIIB) secured tenth position on our list of the best healthcare stocks to buy now. On May 11, an analyst at Argus raised the price target on Biogen Inc. (NASDAQ:BIIB) from $320 to $350 while maintaining a Buy rating on the stock. The analyst noted that the acceptance of a supplemental biologics license application by the FDA for Leqembi for the treatment of early Alzheimer’s could be a growth catalyst for Biogen Inc. (NASDAQ:BIIB) stock. Furthermore, the review of Lecanemab in China, Europe, and Japan and, subsequently, its approval in these markets could provide further impetus to the growth outlook of Biogen Inc. (NASDAQ:BIIB).

9. Humana Inc. (NYSE:HUM)

Number of Hedge Fund Holders: 68

Humana Inc. (NYSE:HUM) is a Louisville, Kentucky-based provider of health insurance products and services to individuals, employers, and government-sponsored programs. The company also operates as a healthcare services company, providing its customers with access to a wide network of healthcare providers, clinics, hospitals, and pharmacies. In an update issued to investors on May 2, TD Cowen increased the target price for Humana Inc. (NYSE:HUM) from $581 to $616 and reiterated an Outperform rating on the stock. Humana Inc. (NYSE:HUM) offers an annual forward dividend yield of 0.68% as of May 29.

8. Bristol-Myers Squibb Company (NYSE:BMY)

Number of Hedge Fund Holders: 69

Bristol-Myers Squibb Company (NYSE:BMY) is a New York-based biopharmaceutical company that is focused on researching and developing treatments for serious illnesses, including cancer, cardiovascular diseases, and immunological disorders. According to data compiled by Insider Monkey, Pzena Investment Management is the biggest hedge fund investor in Bristol-Myers Squibb Company (NYSE:BMY), with a stake worth over $312.7 million as of Q1 2023. The hedge fund, under the helm of Richard Pzena, increased its stake in the stock by 17% during the first quarter.

7. Eli Lilly and Company (NYSE:LLY)

Number of Hedge Fund Holders: 72

On May 15, Terence Flynn at Morgan Stanley raised the price target on Eli Lilly and Company (NYSE:LLY) from $478 to $507 and maintained an Overweight rating on the stock. The analyst increased the probability of success for donanemab from 60% to 90% in early symptomatic Alzheimer’s. This update came after Eli Lilly and Company (NYSE:LLY) revealed favourable results from the Phase 3 trials.

Here’s what Baron Funds said about Eli Lilly and Company (NYSE:LLY) in its Q1 2023 investor letter:

“In pharmaceuticals, our largest investment continues to be in Eli Lilly and Company (NYSE:LLY). Lilly’s new diabetes drug Mounjaro is likely to be approved for obesity in 2023. Lilly has two new obesity drugs advancing into Phase 3 trials. Lilly also has a drug in late-stage development for Alzheimer’s disease. Lilly is not facing any significant near-term patent expirations, and we think the company should be able to grow revenue and earnings at attractive rates through the end of the decade and beyond.”

6. Pfizer Inc. (NYSE:PFE)

Number of Hedge Fund Holders: 73

On May 18, Pfizer Inc. (NYSE: PFE) received encouraging news as an independent panel of experts at the US FDA recommended the approval of Abrysvo, a vaccine developed by Pfizer Inc. (NYSE: PFE). This vaccine is specifically designed to be administered to mothers and aims to prevent respiratory disorders associated with the respiratory syncytial virus (RSV) in newborns. The FDA has already given priority review to the Biologics License Applications (BLA) for the vaccine and has granted the regulatory action date of August 2023. Pfizer Inc.’s (NYSE:PFE) annual forward dividend yield stands at 4.50% as of May 29.

In addition to Pfizer Inc. (NYSE: PFE), UnitedHealth Group Incorporated (NYSE:UNH), Johnson & Johnson (NYSE:JNJ), and Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) are also on our list of the best healthcare stocks to buy now.

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