In this article, we discuss the 5 best healthcare stocks to buy in 2022 according to hedge funds. If you want to read our detailed review of these stocks and the latest market situation, go directly to 10 Best Healthcare Stocks to Buy in 2022 According to Hedge Funds.
5. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 83
Johnson & Johnson (NYSE:JNJ) deals in the production and sale of biopharmaceutical products, medical devices and consumer products around the world. It is known as a Dividend Aristocrat stock, having posted 59 consecutive years of dividend growth. Its yield stands at 2.50% as of May 27.
On May 23, Johnson & Johnson (NYSE:JNJ) was given an ‘Outperform’ rating by SVB Leerink analyst David Risinger, who assumed coverage of the firm with a $200 price target. He believes the company should outperform owing to its ability to post consistent growth and execute value-adding mergers and acquisitions. The stock has risen 7% in the last 12 months, and 13.36% in the last 6 months as of May 27.
Johnson & Johnson (NYSE:JNJ) beat EPS estimates by $0.10 for the first quarter, and posted quarterly revenue of $23.4 billion which fell $192 million below Street estimates.
According to the Q1 database of Insider Monkey, 83 hedge funds were bullish on Johnson & Johnson (NYSE:JNJ) shares, with combined holdings worth $7.4 billion. The same number of hedge funds were long on the company shares a quarter earlier as well. Arrowstreet Capital increased its stake in Johnson & Johnson (NYSE:JNJ) by 38% in the first quarter of 2022, and became its largest shareholder with 6.65 million shares priced at $1.17 billion.
Investment firm Distillate Capital talked about Johnson & Johnson (NYSE:JNJ) in its Q2 2021 investor letter. Here is what the fund had to say:
“The largest additions in the rebalance, Johnson & Johnson was around 50 and 40 basis points incrementally. J&J underperformed in the quarter while its normalized free cash flows held steady and so its position size was topped off to match the stable cash flows.”
4. Danaher Corporation (NYSE:DHR)
Number of Hedge Fund Holders: 83
Danaher Corporation (NYSE:DHR) is a medical company which makes and sells medical, industrial and commercial products around the globe. The company shares were reported in the portfolios of 83 hedge funds at the close of the first quarter, holding stakes with a collective price tag of $6.18 billion. Billionaire Ken Fisher was the largest shareholder of Danaher Corporation (NYSE:DHR) in the first quarter of 2022, with his Fisher Asset Management holding a $1.09 billion stake in the company.
Baird analyst Catherine Schulte in April gave Danaher Corporation (NYSE:DHR) an unchanged ‘Outperform’ rating, and slashed the price target to $319 from $334. She noted that the company management reiterated 2022 core growth guidance citing strong underlying demand, despite inflationary, geopolitical and supply chain issues. The analyst is confident the company can operate through these issues, and favors its diversified operating model.
For Q1 2022, Danaher Corporation (NYSE:DHR) registered a revenue of $7.69 billion, beating Street forecasts by $159.1 million and growing 12.1% year-on-year. The company posted earnings per share of $2.76, beating estimates by $0.10.
Cooper Investors, an investment firm, talked about Danaher Corporation (NYSE:DHR) in its Q1 2022 investor letter. The fund said:
“This combination of attributes was not in favour during a quarter where the market rotated into larger, more traditional index heavyweights that, while growing more slowly and generating lower returns on capital, typically trade on lower headline multiples. In Healthcare for example, we saw portfolio holdings Danaher fall 10-15% in the quarter. Given the relative business quality and growth prospects for a life sciences capital allocator champion like Danaher versus a large diversified pharma company, we think this period of underperformance is likely more a blip than a trend.”
3. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 84
Merck & Co., Inc. (NYSE:MRK) markets drug therapies around the world, and is based in New Jersey. The biopharmaceutical giant is popular among hedge funds, as 84 reported ownership of the company shares at the end of Q1 2022, up from 80 hedge funds a quarter earlier.
Merck & Co., Inc. (NYSE:MRK) released its quarterly earnings report in late April, and posted earnings per share of $2.14 for the first quarter, beating estimates by $0.31. Quarterly revenue was registered at $15.9 billion, up 31.63% year-on-year, and beating Street forecasts by $1.25 billion.
On April 12, Barclays analyst Carter Gould maintained an ‘Overweight’ rating on Merck & Co., Inc. (NYSE:MRK) shares, and raised the price target to $97 from $94. The company shares have seen an uptick of 21.09% in the year to date as of May 27.
Miller Howard Investments, an investment firm, highlighted a few stocks in its Q3 2021 investor letter, and Merck & Co., Inc. (NYSE:MRK) was one of them. The fund said:
“While optimistic about a recovery, we continue to balance our cyclical holdings with dividend-payers in stable, less economically-sensitive industries. We hold three pharmaceutical companies, (which includes) Merck (MRK). All three have strong cash flows and balance sheets, making their high dividends reasonably safe. The investment controversy surrounding these pharma companies is whether they can develop or acquire new products to replace their current blockbuster drugs. The low valuations on these stocks reflects what we believe to be undue pessimism by investors on the prospects for new drugs.”
2. Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Fund Holders: 101
Thermo Fisher Scientific Inc. (NYSE:TMO) is a Massachusetts-based firm which offers medical laboratory products, analytical instruments, and life sciences solutions. Its shares have recorded a 21.91% growth in the last 12 months as of May 27.
Investors were eager on Thermo Fisher Scientific Inc. (NYSE:TMO) at the close of the first quarter, where 101 hedge funds reported bullish bets on the company shares, as opposed to 95 hedge funds a quarter earlier. Ken Fisher’s Fisher Asset Management held 2.25 million shares of Thermo Fisher Scientific Inc. (NYSE:TMO) worth $1.33 billion, making it the firm’s largest Q1 shareholder.
For the quarter ending March, Thermo Fisher Scientific Inc. (NYSE:TMO) disclosed a revenue of $11.8 billion, above estimates by $1.16 billion. EPS was also recorded above market estimates by $1.04.
In February, Thermo Fisher Scientific Inc. (NYSE:TMO) announced a 15-year strategic collaboration agreement with Moderna (NASDAQ:MRNA) to enable large-scale manufacturing of the latter’s Spikevax Covid vaccine. Thermo Fisher in April also announced the opening of a technology manufacturing site in Utah, where the firm will produce high-quality tech and materials required for the development of breakthrough therapies and new vaccines.
ClearBridge Investments discussed Thermo Fisher Scientific Inc. (NYSE:TMO) in its Q4 2021 investor letter. Here’s what the fund had to say:
“Improving health remains a key impact theme for the portfolio, and over the past year or so we have increased our exposure to the health care sector, through the addition of Thermo Fisher Scientific, a leading health care tools company, a leading provider of fertility benefit management services to self-insured employers that offers a rare win-win-win for employers, employees, health systems, and doctors, with clear savings and quality improvements.”
1. UnitedHealth Group Inc. (NYSE:UNH)
Number of Hedge Fund Holders: 103
UnitedHealth Group Inc. (NYSE:UNH) is a healthcare insurance company based in the United States. On April 19, BMO Capital analyst Matt Borsch kept a ‘Market Perform’ rating on the company shares, and bumped the price target to $600 from $510. He sees UnitedHealth well-positioned in the market as healthcare outpaces GDP growth, and as managed healthcare replaces the government’s administration of Medicare and Medicaid.
Here is what investment firm Baron Funds had to say about UnitedHealth Group Incorporated (NYSE:UNH) in its Q1 2022 investor letter:
“UnitedHealth Group Incorporated (NYSE:UNH) is a leading diversified health and wellbeing company whose divisions include insurance arm, United Healthcare and healthcare services arm, Optum, which offers care delivery and other services. Shares increased 1.8% on good fourth quarter results with revenues up 12.5% year-over-year, operating margins of 7.5% and EPS up 78% while also reaffirming its 2022 guidance. We believe UnitedHealth leads the health care industry in innovation and execution as evidenced by its strong value proposition leading to Medicare Advantage share gains, strong cost controls, and its leadership position in the shift to value-based care.”
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