5 Best Medical Stocks To Invest In

In this article, we discuss 5 best medical stocks to invest in. If you want to see more stocks in this selection, check out 13 Best Medical Stocks To Invest In. 

5. Medtronic plc (NYSE:MDT)

Number of Hedge Fund Holders: 58

Medtronic plc (NYSE:MDT) develops, manufactures, and sells device-based medical therapies worldwide, including implantable cardiac pacemakers, cardioverter defibrillators, cardiac resynchronization therapy devices, cardiac ablation products, and insertable cardiac monitor systems. Medtronic plc (NYSE:MDT) is one of the best medical stocks to invest in. 

On March 2, the company declared a quarterly dividend of $0.68 per share, in line with previous. The dividend is payable on April 14, to shareholders of record on March 24. 

According to Insider Monkey’s fourth quarter database, 58 hedge funds were bullish on Medtronic plc (NYSE:MDT), compared to 55 funds in the earlier quarter. John Overdeck and David Siegel’s Two Sigma Advisors is the largest stakeholder of the company, with 5.35 million shares worth $416.2 million. 

Artisan Value Fund made the following comment about Medtronic plc (NYSE:MDT) in its Q4 2022 investor letter:

“We also added to our position in Medtronic plc (NYSE:MDT), taking advantage of attractive prices. While procedure volumes for Medtronic, a medical technology company, are close to their pre-COVID levels, professional staffing shortages, supply chain constraints and some raw materials shortages globally have held back the availability of procedures. These factors have caused its top line to contract. However, foreign exchange has also been a big headwind. Each of its segments has its own respective reasons for ebbs and flows over the past couple quarters, but generally results have been soft and slow to recover. We are being patient with our investment in Medtronic because the company continues to be a strong free cash flow generator and is attractively priced, with a FCF yield of 5.3% and a dividend yield of 3.4%. Medtronic is under new management that is focused on growing the company’s top line, reinvesting in R&D, returning cash to shareholders and growing operating profits. We like the new management’s strategy and believe new product launches, increased surgery visits, sound M&A transactions and a shareholder-returns focus should reinvigorate the business.”

4. Tenet Healthcare Corporation (NYSE:THC)

Number of Hedge Fund Holders: 59

Tenet Healthcare Corporation (NYSE:THC) was founded in 1967 and is headquartered in Dallas, Texas. It operates as a diversified healthcare services company, with three primary segments – Hospital Operations, Ambulatory Care, and Conifer. On February 9, Tenet Healthcare Corporation (NYSE:THC) reported a Q4 Non-GAAP EPS of $1.96 and a revenue of $4.99 billion, outperforming Wall Street estimates by $0.73 and $50 million, respectively. 

Ann Hynes, an analyst at Mizuho, increased the price target on Tenet Healthcare Corporation (NYSE:THC) from $60 to $78 and maintained a Buy rating on the shares on February 17, following the Q4 results. The analyst believes that there is potential for estimates to be exceeded, due to a better-than-expected payer mix in acute care, a quicker recovery in the surgery center business, and positive trends in contract labor. In Hynes’ opinion, improving trends in the surgery center segment are crucial for Tenet Healthcare Corporation (NYSE:THC) to unlock multiple expansion. 

According to Insider Monkey’s fourth quarter database, 59 hedge funds were bullish on Tenet Healthcare Corporation (NYSE:THC), compared to 60 funds in the prior quarter. Larry Robbins’ Glenview Capital is the largest stakeholder of the company. 

Greenlight Capital made the following comment about Tenet Healthcare Corporation (NYSE:THC) in its Q4 2022 investor letter:

“Though we believe we are in the middle stages of a bear market, we did establish a new medium-sized long position in Tenet Healthcare Corporation (NYSE:THC) during the fourth quarter.

THC is an operator of hospitals and ambulatory surgery centers (ASC). In recent years, the company has grown and transitioned its business mix towards its higher-margin ASCs. This shift has enabled the company to generate significant, and what we believe to be sustainable, cash flows.

During 2022, the company lowered its guidance due to COVID and inflationary headwinds, resulting in its shares declining by more than 50% year-to-date through late October. We believe this pullback offered an attractive opportunity to participate in the company’s transformation, as we expect its ASC growth to remain strong and its now smaller hospital portfolio to improve from both a cost and volume perspective. We acquired our shares from late December through the beginning of January for an average price of $48.61, or 8.7x 2023 consensus earnings. THC recently announced and began its plan to repurchase about 20% of the outstanding shares by the end of 2024.”

3. Abbott Laboratories (NYSE:ABT)

Number of Hedge Fund Holders: 60

Abbott Laboratories (NYSE:ABT) develops, manufactures, and sells health care products worldwide. It operates in four segments – Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Medical Devices. It is one of the premier medical stocks to invest in. On February 17, Abbott Laboratories (NYSE:ABT) declared a quarterly dividend of $0.51 per share, in line with previous. The dividend is payable on May 15, to shareholders of record on April 14. 

On March 28, in a sector note on the U.S. Medical Supplies and Devices, UBS initiated coverage of Abbott Laboratories (NYSE:ABT) with a Buy rating and a $117 price target.

According to Insider Monkey’s fourth quarter database, 60 hedge funds were bullish on Abbott Laboratories (NYSE:ABT), compared to 62 funds in the earlier quarter. Ric Dillon’s Diamond Hill Capital is the largest stakeholder of the company, with 5.3 million shares worth $583.5 million. 

Diamond Hill Large Cap Concentrated Strategy made the following comment about Abbott Laboratories (NYSE:ABT) in its Q4 2022 investor letter:

“Abbott Laboratories (NYSE:ABT) outperformed during the quarter as investors flocked to safety. Although we are pleased with the stock’s performance, we are interested in the company due to its favorable long-term positioning. Abbott is a high-quality company with a talented management team that makes smart capital allocation decisions. The company has leading health care and consumer franchises with a particularly strong competitive position in its medical device business. Abbott continues to launch innovative products in key strategic areas (such as diabetes, structural heart and diagnostics), which should help drive not only revenue growth but margin expansion.”

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

Number of Hedge Fund Holders: 64

HCA Healthcare, Inc. (NYSE:HCA) delivers healthcare services in the United States. The company manages hospitals for general and acute care that provide various medical and surgical services, including intensive care, cardiac care, emergency services, diagnostic services, as well as outpatient services like laboratory tests, radiology, respiratory therapy, physical therapy, and cardiology. It is one of the best medical stocks to invest in. On March 15, HCA Healthcare, Inc. (NYSE:HCA) declared a $0.60 per share quarterly dividend, a 7.1% increase from its prior dividend of $0.56. The dividend is payable on March 30, to shareholders of record on March 17. 

On February 23, JPMorgan raised the firm’s price target on HCA Healthcare, Inc. (NYSE:HCA) to $257 from $235 and kept an Overweight rating on the shares. The firm thinks that HCA Healthcare, Inc. (NYSE:HCA) is still in a good position after Q4, but it has adjusted the multiples and ratings of the managed care group to align with historical levels. Furthermore, the firm has mentioned that the Centers for Medicare and Medicaid Services have announced a 2% preliminary rate cut for Medicare Advantage, which is lower than what the market was expecting. This news has disappointed the analyst, as stated in a research note to investors.

According to Insider Monkey’s fourth quarter database, 64 hedge funds were bullish on HCA Healthcare, Inc. (NYSE:HCA), and Harris Associates is the largest position holder in the company, with 6.6 million shares worth $1.60 billion. 

Diamond Hill Large Cap Strategy made the following comment about HCA Healthcare, Inc. (NYSE:HCA) in its Q4 2022 investor letter:

“HCA Healthcare, Inc. (NYSE:HCA)’s stock price continued to advance in Q4 following a difficult first half of 2022. Fortunately, we did not own shares until the end of Q2. Two major factors that are top of mind for investors right now are volumes and labor constraints, both of which continue to normalize albeit at a relatively slow pace. We remain favorable on the long-term fundamentals of the business and the opportunity for HCA to reinvest the large amounts of cash it generates at attractive returns. That said, the discount to our intrinsic value estimate has narrowed significantly following robust returns in the second half of the year.”

1. DexCom, Inc. (NASDAQ:DXCM)

Number of Hedge Fund Holders: 70

DexCom, Inc. (NASDAQ:DXCM) is a medical device company that specializes in the design, development, and commercialization of continuous glucose monitoring (CGM) systems in the United States and internationally. The stock benefited from the Q4 results that beat on the bottom line. It is one of the best medical stocks to watch. 

On March 27, JPMorgan raised its price target on DexCom, Inc. (NASDAQ:DXCM) to $257 from $235 and maintained an Overweight rating on the company’s shares. The firm thinks that DexCom, Inc. (NASDAQ:DXCM) is still in a good position after Q4, but it has adjusted the multiples and ratings of the managed care group to align with historical levels. 

According to Insider Monkey’s fourth quarter database, 70 hedge funds were long DexCom, Inc. (NASDAQ:DXCM), compared to 62 funds in the last quarter. Ken Griffin’s Citadel Investment Group is a significant position holder in the company, with 2.23 million shares worth $252.8 million.  

The Brown Capital Management Mid Company Fund made the following comment about DexCom, Inc. (NASDAQ:DXCM) in its Q4 2022 investor letter:

“DexCom, Inc. (NASDAQ:DXCM) develops market-leading continuous glucose monitors (CGMs) for diabetics. On Dec. 8, DexCom received Food and Drug Administration (FDA) approval for its next-generation G7 device for all diabetes, including Type 1 and Type 2. The G7 device will launch in early 2023, with the company working to expand reimbursement coverage for the product. We expect the commercial Durable Medical Equipment and Medicare channels to provide coverage relatively soon following approval, with commercial pharmacy coverage coming sometime in the second or third quarters of 2023. The G7 device has some powerful form factors that should generate new patient demand. The G7 device is 60% smaller than the G6, with only a 30- minute warmup period, and both attributes are superior to their main competitor, Abbott’s Libre 3 device.

Also, The Centers for Medicare and Medicaid (CMS) has issued a draft coverage-determination proposal that would expand coverage for CGMs. Under the proposal, the CMS would cover CGMs for diabetes patients who are treated with insulin or “have a history of problematic hypoglycemic,” as defined by the frequency or severity, regardless of whether they have Type 1 or Type 2 diabetes. DexCom should benefit from this expanded coverage.

Given the FDA approval of G7, this helps position DexCom for durable long-term growth, especially with other new products as well as Total Addressable Market (TAM) expansion opportunities. DexCom has put up impressive growth numbers despite the backdrop of macroeconomic, inflationary and currency headwinds. We still believe the business is undervalued in the context of its long-term growth potential and operational levers.”

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