5 Best Psychedelic Stocks to Buy According to Hedge Funds

In this article, we discuss 5 best psychedelic stocks to buy according to hedge funds. If you want to see more stocks in this selection, check out 10 Best Psychedelic Stocks to Buy According to Hedge Funds. 

5. Atai Life Sciences N.V. (NASDAQ:ATAI)

Number of Hedge Fund Holders: 15

Atai Life Sciences N.V. (NASDAQ:ATAI) was founded in 2018 and is headquartered in Berlin, Germany. It operates as a clinical-stage biopharmaceutical company, engaged in developing therapeutic candidates that focus on various mental health disorders. It is one of the best psychedelic stocks to monitor. 

On March 6, Atai Life Sciences N.V. (NASDAQ:ATAI) announced a decrease of approximately 30% in its workforce as part of a strategic review, alongside other clinical and corporate updates. The company stated that this decision was made after evaluating its pipeline and to improve operational efficiency and concentration. Atai Life Sciences N.V. (NASDAQ:ATAI) added that the cost savings will primarily come from the reduction of workforce in general, as well as administration and non-clinical development. As a result, Atai’s cash runway is expected to extend until the first half of 2026.

According to Insider Monkey’s fourth quarter database, 15 hedge funds were bullish on Atai Life Sciences N.V. (NASDAQ:ATAI), compared to 19 funds in the earlier quarter. Cathie Wood’s ARK Investment Management is the largest stakeholder of the company, with 5.6 million shares worth $15 million. 

4. Relmada Therapeutics, Inc. (NASDAQ:RLMD)

Number of Hedge Fund Holders: 18

Relmada Therapeutics, Inc. (NASDAQ:RLMD) is a Florida-based clinical-stage biotechnology company, focused on developing treatments for central nervous system diseases and other disorders. On December 8, Joon Lee, an analyst at Truist, downgraded Relmada Therapeutics, Inc. (NASDAQ:RLMD) by lowering the firm’s price target on the shares from $7 to $4, while maintaining a Hold rating. The reason for the downgrade is the company’s announcement of the second Phase 3 trial failure of REL-1017 in MDD as an adjunctive therapy, known as RELIANCE I, which comes after the first Phase 3 failure as a monotherapy in RELIANCE III. The analyst believes that there is a low possibility of RELIANCE II working, and the outlook for REL-1017 is bleak, which has led him to reduce the price target to reflect the company’s current cash per share value.

According to Insider Monkey’s fourth quarter database, 18 hedge funds were long Relmada Therapeutics, Inc. (NASDAQ:RLMD), compared to 23 funds in the prior quarter. David Kroin’s Deep Track Capital held the biggest position in the company. 

3. AbbVie Inc. (NYSE:ABBV)

Number of Hedge Fund Holders: 73

AbbVie Inc. (NYSE:ABBV) develops, manufactures, and sells pharmaceuticals worldwide. In May 2020, AbbVie Inc. (NYSE:ABBV) gained a stake in the psychedelic drugs market through the acquisition of Allergan PLC. It is one of the best psychedelic stocks to consider. On February 16, the company declared a quarterly dividend of $1.48 per share, in line with previous. The dividend is payable on May 15, to shareholders of record on April 14. 

On March 1, Guggenheim analyst Vamil Divan initiated coverage of AbbVie Inc. (NYSE:ABBV) with a Buy rating and a $172 price target. Although many investors have been focusing on the decline of Humira’s sales due to the loss of U.S. market exclusivity, the analyst believes that this has caused them to overlook the strength of the rest of AbbVie’s business, which includes Skyrizi, Rinvoq, and Vraylar. The analyst thinks that these products have the potential to bring in more profits through recent or upcoming line extensions. The firm also expects that AbbVie’s pipeline assets, such as epcoritamab and Teliso-V, will help to stabilize the company’s oncology business.

According to Insider Monkey’s fourth quarter database, 73 hedge funds were long AbbVie Inc. (NYSE:ABBV), compared to 80 funds in the preceding quarter. Cliff Asness’ AQR Capital Management is a significant position holder in the company, with 1.4 million shares worth $229 million. 

Alger Capital made the following comment about AbbVie Inc. (NYSE:ABBV) in its Q4 2022 investor letter:

“AbbVie Inc. (NYSE:ABBV) is a global biopharmaceutical company that develops and markets drugs in areas such as immunology. virology and oncology. Recently, the company expanded through the acquisition of Allergan, which added robust growth assets to help offset the loss of U.S. patent protection for Humira, a leading treatment used for rheumatology, dermatology. gastroenterology, and ophthalmology. While AbbVie reported weak third quarter revenues across the board, the U.S. Food and Drug Administration (FDA) approved Vraylar (an antipsychotic treatment) in December. Despite concerns around Humira’s loss of patent protection, we believe AbbVie has significantly diversified its revenue and that its launch of Rinvog for psoriatic arthritis and atopic dermatitis could be promising.”

2. Merck & Co., Inc. (NYSE:MRK)

Number of Hedge Fund Holders: 77

Merck & Co., Inc. (NYSE:MRK) is an American multinational pharmaceutical company that offers human health pharmaceutical products in the areas of oncology, hospital acute care, immunology, neuroscience, virology, cardiovascular, and diabetes, as well as animal health products. In March 2021, Novamind, a company that specializes in psychedelic life sciences, partnered with Merck & Co., Inc. (NYSE:MRK). The partnership involves Cedar Clinical Research (CCR), a subsidiary of Novamind, acting as a research division for a new drug developed by Merck that is aimed at treating depression that is resistant to treatment. It is one of the best psychedelic stocks to invest in. 

On January 24, Merck & Co., Inc. (NYSE:MRK) declared a quarterly dividend of $0.73 per share, in line with previous. The dividend is distributable on April 10, to shareholders of record on March 15. 

According to Insider Monkey’s fourth quarter database, 77 hedge funds were bullish on Merck & Co., Inc. (NYSE:MRK), compared to 82 funds in the prior quarter. Phill Gross and Robert Atchinson’s Adage Capital Management is a prominent stakeholder of the company, with 2.7 million shares worth $301.70 million. 

Artisan Value Fund made the following comment about Merck & Co., Inc. (NYSE:MRK) in its Q4 2022 investor letter:

“Merck & Co., Inc. (NYSE:MRK) is a provider of health care solutions including prescription medicines, vaccines, biologic therapies, animal health and consumer care products. Shares have benefited from investors seeking safety in areas with less economic and interest rate sensitivity. With about one third of its sales generated by blockbuster oncology drug Keytruda, the key issue for investors is the success of its large R&D pipeline to replace those sales when Keytruda comes off patent in 2028. However, Merck seems to be getting little credit from investors for the 60+ programs it has in clinical development, despite having several solid and large new product opportunities. Additionally, the company’s strong balance sheet and robust free cash flow provide it multiple options for future partnerships and acquisitions, besides return of capital to shareholders via dividends and share repurchases.”

1. Johnson & Johnson (NYSE:JNJ)

Number of Hedge Fund Holders: 84

Johnson & Johnson (NYSE:JNJ) is an American multinational pharmaceutical company, which is also categorized as one of the best psychedelic stocks by smart investors. In March 2019, Johnson & Johnson’s (NYSE:JNJ) nasal spray called SPRAVATO (esketamine) became the first psychedelic drug to receive the FDA’s Breakthrough Therapy designation. The drug is used to treat depression that is resistant to other treatments.

On March 1, Guggenheim initiated coverage of Johnson & Johnson (NYSE:JNJ) with a Neutral rating and a $161 price target. While Guggenheim supports Johnson & Johnson (NYSE:JNJ)’s plan to separate its Consumer Health division and believes that its MedTech segment is showing positive signs of recovery, it is looking for more information about the outlook for its Pharma business. The firm is concerned about upcoming patent expirations, such as Stelara later this year, and has forecasted lower sales than management’s expectation of $60 billion in Pharma sales by 2025. The firm’s forecast is also lower than management’s expectations for several pipeline assets that they have touted as having potential for peak annual sales of $1 billion or $5 billion. 

According to Insider Monkey’s fourth quarter database, 84 hedge funds were long Johnson & Johnson (NYSE:JNJ), compared to 85 funds in the prior quarter. Ray Dalio’s Bridgewater Associates held a significant position in the company, comprising 3.5 million shares worth $630.2 million. 

In its Q2 2022 investor letter, Mayar Capital, an asset management firm, highlighted a few stocks and Johnson & Johnson (NYSE:JNJ) was one of them. Here is what the fund said:

“Johnson & Johnson (NYSE:JNJ) is currently our largest position and a long-standing holding. The majority of the group’s sales comes from its collection of pharmaceutical franchises, but a large majority (~45%) comes from its collection of medical device businesses and its consumer brands.

Here’s how JNJ makes and spends a dollar of revenues: As of 2021, about 55 cents of that dollar comes from its pharmaceutical sales – sales of drugs to pharmacies and distributors – while 30 cents come from the sale of medical devices, such as surgery equipment and orthopedics. The rest of that dollar in sales comes from sales of JNJ’s consumer brands such as Listerine mouthwash, Nicorette nicotine tablets and Neutrogena cosmetics (…read more)

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