In this article, we will be taking a look at the 7 best medical device stocks to buy right now.
Global Medical Devices Market: Growth, Technological Advancements, and Key Industry Trends
The global medical devices market is experiencing robust growth, driven by technological advancements, an aging population, and an increasing prevalence of chronic diseases. In 2023, the market was valued at USD 518.46 billion. It is projected to grow from USD 542.21 billion in 2024 to USD 886.80 billion by 2032, exhibiting a compound annual growth rate (CAGR) of 6.3% during this forecast period.
The most valuable medical device companies in the United States include Medtronic, Johnson & Johnson, Abbott Laboratories, and others. These companies are leaders in diagnostic imaging and surgical robotics, and they are known for their excellence in research, development, and commercialization. Their efforts have led to advancements in healthcare delivery both nationally and internationally. The U.S. medical devices market size was estimated at USD 169.51 billion in 2023, per Precedence Research. It is predicted to reach approximately USD 328.65 billion by 2034, growing at a CAGR of 6.2% from 2024 to 2034.
The U.S. Cluster Mapping Tool highlights the significance of the Medical Devices industry, which employed over 329,000 people and had a payroll of $25.8 billion in 2020. Globally, the 2023 EY Medical Technology report emphasizes key trends for Medtech leaders, including financing and supply chain management. While R&D investment hit a record $24.7 billion, it marked a return to historical norms in 2022. The report also notes a sharp decline in mergers and acquisitions, signaling a reduced focus on inorganic growth strategies. The report projects the global medical device outsourcing market to reach $300.09 billion by 2032, with a CAGR of 11.14% from 2021 to 2028. Key growth drivers include cost-effectiveness, increased efficiency, and the demand for specialized expertise.
The COVID-19 pandemic greatly affected the medical device industry, with In Vitro Diagnostics (IVD) seeing major revenue growth in 2020 and 2021 due to demand for rapid and PCR tests. Investment in digital health surged in 2021, reaching nearly $45 billion, surpassing total funding from 2010 to 2017 combined.
Integrating technology like artificial intelligence (AI) into healthcare has transformed diagnosis, treatment, and patient monitoring. AI applications range from analyzing radiological images for early detection to forecasting outcomes using electronic health records. A notable example occurred in March 2023 when NVIDIA Corporation announced a collaboration with Medtronic to incorporate its AI technologies into Medtronic’s FDA-cleared GI Genius, an intelligent endoscopy module that aids in detecting pre-cancerous growths.
A person undergoing a non-invasive aesthetic procedure featuring advanced medical device platforms.
Our Methodology
For our methodology, we have ranked the best medical-device stocks to buy right now based on the number of hedge funds that held stake in them as of Q2, 2024.
“Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).”
Here is our list of the 7 best medical device stocks to buy right now.
7. Illumina, Inc. (NASDAQ:ILMN)
Number of Hedge Fund Holders: 56
Illumina, Inc. (NASDAQ:ILMN) is based in San Diego and focuses on medical diagnostics and research, offering products like DNA library preparation kits and robot control software for the healthcare industry.
As of Q2 2024, Illumina, Inc. (NASDAQ:ILMN) Acquired Fluent Biosciences, which is a developer of an emerging and highly differentiated single-cell technology. Illumina also presented 14 research abstracts at the ASCO Annual Meeting and integrated its XLEAP-SBS™ chemistry into all reagents for the NextSeq™ 1000/2000 sequencers. The company expanded its oncology offerings with TruSight™ Oncology 500 HT and TSO 500 ctDNA v2 assays. Additionally, it launched DRAGEN™ v4.3, the latest version of its sequencing analysis software.
Illumina, Inc. (NASDAQ:ILMN) was referenced by Patient Capital Management in their investor letter dated Q2 2024. The company stated as follows:
“Illumina, Inc. is a good example. We entered the name late last year as the company began to trade at a 5-year low. The company is a leader in the genomic sequencing space but made an ill-advised acquisition of Grail, a blood-based multi-cancer early detection product, in 2021 for $8 billion. Grail was an annual ~$600m drag on profitability hitting the financials at the same time that competition began to pick up and the overall demand environment began to weaken. Despite increased competition in the genome sequencing space, Illumina continues to be a leader with ~80% market share today. With the successful separation of Grail Inc. (GRAL) in June, Illumina has now returned to a pure-play sequencing company. As the company returns to historical profitability post Grail spin-off and as the demand environment normalizes post COpost-COVIDlieve you can buy a market leader in a secularly growing industry for less than a market multiple.”
As of Q2 2024, 56 hedge funds tracked by Insider Monkey held stakes in the stock with Corvex Capital being the largest stakeholder among these, with 2,289,486 shares worth $238,976,549. On top of that, 17 analysts have set a 12-month average price target of $150.29 for Illumina, with forecasts ranging from $105.00 to $242.00, indicating a potential 19.14% increase from the current price of $126.15.
6. DexCom, Inc. (NASDAQ:DXCM)
Number of Hedge Fund Holders: 64
DexCom, Inc. (NASDAQ:DXCM) is a medical technology company that specializes in continuous glucose monitoring (CGM) systems for people with diabetes. At its core, Dexcom develops and manufactures devices that allow individuals to track their blood glucose levels in real-time without the need for frequent finger pricks.
The launch of Stelo, DexCom’s first over-the-counter nonprescription glucose biosensor, represents a significant catalyst for the company’s growth. This FDA-cleared device expands DexCom’s market reach beyond traditional diabetes patients, targeting individuals who want to monitor their glucose levels for general health purposes.
DexCom Inc. (NASDAQ:DXCM) posted solid financial results for the second quarter of 2024, with earnings per share (EPS) of $0.43, above the $0.39 predicted. DexCom Inc. (NASDAQ:DXCM) had revenue of $1 billion as opposed to the estimated $1.04 billion, but its strong earnings per share (EPS) underscores the company’s profitability and room for expansion. The continual technological improvements in continuous glucose monitoring (CGM) and the growing market share of DexCom Inc. (NASDAQ:DXCM) in the healthcare sector attest to the company’s strength in an industry that is rapidly developing.
Regarding DexCom, Inc. (NASDAQ:DXCM), Carillon Eagle Mid Cap Growth Fund made the following statement in its Q2 2024 investor letter:
“DexCom, Inc. is a medical device company that helped pioneer the design and development of continuous glucose monitoring systems (CGMs). They are primarily used by a large fraction of Type 1 diabetics and a meaningfully growing number of Type 2 diabetics to monitor their blood glucose levels. As such, we believe there is a huge greenfield opportunity as many individuals in the addressable market still rely on finger prick tests. Despite beating analysts’ estimates and raising guidance in most quarters, the stock has taken a hit as the size of the beats and raises have lately become a bit constrained. Nevertheless, we continue to be supportive of the stock through new product introductions and the integration of its CGMs into tubed and tubeless insulin pump systems.”
Around 64 hedge fund holders tracked by Insider Monkey held stake in the stock in Q2 2024. The largest stakeholder in the company among these was Holocene Advisors with 1,773,235 shares worth $201,049,384. The stock holds a Strong Buy rating. On the back of that, 17 analysts have set a 12-month average price target of $99.94 for Dexcom, suggesting a potential 49.77% increase from the current price of $66.73.
5. Intuitive Surgical, Inc. (NASDAQ:ISRG)
Number of Hedge Fund Holders: 67
Intuitive Surgical, Inc. (NASDAQ:ISRG) is a leader in robotic surgery, primarily known for its Da Vinci system, which utilizes AI to enhance precision and expand surgical capabilities. The system improves accuracy in tissue manipulation and surgical planning and is increasingly used in urological, gynecological, and general surgeries, resulting in better patient outcomes through minimally invasive techniques.
Intuitive Surgical, Inc. (NASDAQ:ISRG) is also expanding its product portfolio, with the recent FDA clearance of its next-generation da Vinci 5 system in March 2024. This new system features improved imaging, force feedback, and other advancements that could drive further adoption and upgrades. In Q2 2024, the company reported revenue of $2.01 billion, a 14.5% increase year-over-year. This growth was driven by a 17% increase in da Vinci procedures and the placement of 341 new systems during the quarter.
As of Q2, 67 hedge funds tracked by Insider Monkey held stake in the stock with Fisher Asset Management being the largest stakeholder of these with 4,696,173 shares worth $2,089,093,098. Also, 18 Wall Street analysts have set a 12-month average price target of $490.06 for Intuitive Surgical, with estimates ranging from $410.00 to $560.00, indicating a potential 1.17% increase from the current price of $484.39.
