8 Most Promising Medical Stocks According to Hedge Funds

In this article, we will be taking a look at 8 most promising medical stocks according to hedge funds.

Growth and Innovation in the Global Medical Devices Sector

The healthcare sector depends on medical technology advancements, particularly devices used in disease prevention, diagnosis, and treatment. Unlike pharmaceuticals, medical devices work through physical or mechanical means rather than chemical processes. Key products include pacemakers, imaging equipment, dialysis machines, and implants.

Like many other industries, the medical device industry was greatly affected by the start of the COVID-19 pandemic. Interestingly, the In Vitro Diagnostics (IVD) segment saw significant revenue growth in 2020 and 2021, mostly due to the increased demand for PCR and fast testing. Overall, even while funding for digital health had been rising gradually in the years preceding the pandemic, it saw a notable uptick in 2021, hitting around $45 billion, more than all of the funds amassed between 2010 and 2017.

The global market for medical devices, estimated to be worth $570 billion in 2022, is expected to increase at a compound annual growth rate (CAGR) of 5.8% from 2023 to 2032, reaching over $996.93 billion. By 2032, the U.S. market is expected to have grown to a value of around $246.51 billion, with a compound annual growth rate (CAGR) of 5.6%. Key drivers propelling the medical devices market’s expansion in the upcoming years are the rise in demand for cutting-edge treatments and continuous technical developments in medical devices to meet unmet demands in the healthcare industry.

The importance of the medical devices sector, which employed over 329,000 people and generated $25.8 billion in payroll in 2020, is highlighted by the U.S. Cluster Mapping Tool. The 2023 EY Medical Technology study highlights supply chain management and financing as two important topics for Medtech leaders worldwide. In 2022, R&D expenditure returned to historical norms, despite reaching a record $24.7 billion. A significant drop in mergers and acquisitions is also noted in the report which indicates a diminished emphasis on inorganic growth tactics.

Artificial intelligence (AI) and other technologies have revolutionized patient monitoring, diagnosis, and treatment in the healthcare industry. Applications of AI include predicting results using electronic health information and evaluating radiological images for early detection. One noteworthy instance was when NVIDIA Corporation and Medtronic announced in March 2023 that they would be integrating NVIDIA’s AI technology into Medtronic’s FDA-approved GI Genius, an intelligent endoscopic module that helps detect precancerous growths.

Also Read 10 Best Healthcare Stocks to Buy According to Hedge Funds and 10 Best Mid-Cap Healthcare Stocks to Buy Now.

8 Most Promising Medical Stocks According to Hedge Funds

A closeup shot of a laboratory technician handling a medical device used for fertility treatments.

Our Methodology 

For our methodology, we began by filtering medical stocks from healthcare equipment ETFs. Next, we identified those with the highest number of hedge fund holders as of Q2 2024, using data from the Insider Monkey database. The final selection was ranked based on the number of hedge fund holders to prioritize stocks with greater institutional interest.

“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 8 most promising medical stocks according to hedge funds.  

8. Lantheus Holdings, Inc. (NASDAQ:LNTH

Number of Hedge Fund Holders: 34 

Lantheus Holdings, Inc. (NASDAQ:LNTH) is a leading radiopharmaceutical company that develops, manufactures, and commercializes diagnostic and therapeutic products for medical imaging. Their advanced imaging agents and technologies assist doctors in detecting, treating, and monitoring diseases, with a focus on cardiology and oncology.

In Q2 2024, Lantheus Holdings Inc. reported a 22.5% year-over-year revenue growth. This was largely driven by Radiopharmaceutical Oncology, which grew 29.3%, due to the continued strength of PYLARIFY, whose sales increased by 30% due to rising awareness and adoption. Precision diagnostics revenue rose by 14.9%, with DEFINITY sales up 10.7% and TechneLite revenue jumping 30.5%, driven by strong market demand.

However, strategic partnerships and other revenue declined by 31.7%, mainly due to the absence of $7 million in RELISTOR-related royalties from the previous year. Despite this, strong contributions from MK-6240 and advancements in patient care and research partnerships helped maintain overall company momentum by mid-2024.

Lantheus Holdings, Inc. (NASDAQ:LNTH) is focused on advancing treatments for Alzheimer’s disease and prostate cancer. It acquired diagnostic tools NAV-4694 and MK-6240 for early Alzheimer’s detection and secured global rights to RM2, a tool for diagnosing early-stage prostate cancer. The company also licensed two promising drug candidates from Radiopharm Theranostics.

Lantheus has delivered a remarkable 306% return over three years, driven by strong financial performance, including its recent transition to earnings per share of $1.80 in Q2 2024. This growth, along with the company’s positive momentum, positions it as a promising investment opportunity.

ClearBridge Small Cap Value Strategy stated the following regarding Lantheus Holdings, Inc. (NASDAQ:LNTH) in its Q2 2024 investor letter:

“Health care results lifted relative performance during the period and included our top two individual performers in Lantheus and newer portfolio addition Corcept Therapeutics. Lantheus Holdings, Inc. (NASDAQ:LNTH), which makes diagnostic and therapeutic products that help clinicians diagnose and treat heart, cancer, and other diseases, saw its share price rise on strong first-quarter results.”

7. Masimo Corporation (NASDAQ:MASI)

Number of Hedge Fund Holders: 35 

Masimo Corporation (NASDAQ:MASI) is a global medical technology company specializing in noninvasive patient monitoring technologies. It develops and manufactures monitoring devices, sensors, and patient monitors used in healthcare settings worldwide. The company’s main goal is to improve patient outcomes and reduce healthcare costs through its advanced monitoring solutions.

Masimo’s flagship product is its Signal Extraction Technology (SET) pulse oximetry, which provides accurate measurements of blood oxygen saturation even in challenging conditions where traditional pulse oximeters may fail.

Masimo Corporation (NASDAQ:MASI) benefits from both growth and recurring revenue by selling sensor housings (by expanding the customer base for them) and sensors. Masimo is also opening a new plant in Malaysia to leverage economies of scale. Additionally, it halted sales of Apple’s latest Apple Watch due to patent disputes, and if Masimo launches its medical monitoring watch, the stock could see further gains. In September, its stock rose by 19% after management changes, and the planned spin-off of its consumer business could boost investor sentiment.

Masimo Corporation (NASDAQ:MASI)’s management shared details about cost control during the Q2 2024 earnings call:

“For the second quarter, our consolidated non-GAAP gross margin was 54%, which included gross margins of 62.5% for healthcare and 35% for non-healthcare. Healthcare gross margins improved 240 basis points year over year and rose 20 basis points sequentially, which is attributable to the relocation of sensor manufacturing to Malaysia combined with increased operational efficiencies and a favorable mixed benefit from higher consumable sales.

Our progress on this front gives us confidence in achieving our long-term goal of 30% operating margins for the healthcare business in five years. For our consolidated business, non-GAAP operating profit was $73 million. Our operating margin of 15% improved sequentially from the first quarter but declined modestly versus last year due to the return of performance-based compensation to normalized levels in 2024. Excluding the impact of performance-based compensation, our operating expenses decreased 4% versus the prior year period due to cost reduction initiatives. Even with the return of performance-based compensation, we delivered 13% earnings growth to achieve non-GAAP earnings per share of $0.86 for the second quarter.”

6. Solventum Corporation (NYSE:SOLV)

Number of Hedge Fund Holders: 37 

Solventum Corporation (NYSE:SOLV), a newly independent healthcare company that spun off from 3M in April 2024, develops and sells a wide range of medical products, including wound care, surgical supplies, dental products, healthcare software, and filtration systems.

Solventum Corp is implementing a 3-phased approach to stabilize its business, reposition for growth, and optimize its portfolio. Phase 1 involves establishing a new mission, acquiring talent, and restructuring for agility while managing its separation from 3M. As part of the separation, the company is relocating manufacturing lines from 67 plants to 29 Solventum plants, with 2 new facilities under construction.

Additionally, Solventum Corporation (NYSE:SOLV) is restructuring its distribution and supply chain by reducing the number of distribution centers from 122 to 73. The rebranding efforts are extensive, covering over 90 countries, and management has adjusted commercial distribution models in more than 60 countries.

In Q2 2024, Solventum Corp reported revenue of $2.08 billion. The MedSurg segment grew by 1.8% year-over-year, driven by negative pressure wound therapy and antimicrobial IV site management solutions. However, the Dental segment saw a 2% decline due to volume pressures from challenging market conditions. The HIS segment increased by 3.6%, fueled by the adoption of the 360 Encompass and steady performance management solutions. The Purification and Filtration segment experienced a slight decrease of 0.9%, impacted by performance in drinking water filtration.

5. Globus Medical, Inc. (NYSE:GMED

Number of Hedge Fund Holders: 38 

Globus Medical, Inc. (NYSE:GMED) is a leading medical device company that specializes in musculoskeletal solutions. It develops, manufactures, and distributes innovative implants and instruments for spinal, orthopedic, and neurosurgical procedures. Its product portfolio includes spinal implants, biologics, and enabling technologies such as robotic navigation systems.

In Q2 2024, Globus Medical reported revenue of $629.7 million, a remarkable 115.93% increase from $291.6 million in Q2 2023, largely driven by the acquisition of NuVasive. U.S. sales rose by 103.5%, while international sales surged by 182.3% (191.3% on a constant currency basis).

Despite strong revenue growth, Globus Medical, Inc. (NYSE:GMED)’s profitability metrics were mixed. GAAP net income decreased by 45% to $31.8 million, and GAAP diluted EPS fell to $0.23 from $0.57 in the previous year. However, non-GAAP diluted EPS improved to $0.75 from $0.63, and adjusted EBITDA increased by 98% to $190.4 million. The decline in GAAP metrics is attributed to high merger-related costs and amortization expenses, but the improvement in non-GAAP figures indicates underlying operational efficiency.

Here is what Daniel Scavilla, the company’s president and CEO said about the company’s performance in its Q2 call earning transcript:

“From pioneering the XLIF procedure that is now the gold standard of lateral surgery, leading the market in expandable spacer technology, and developing the best spinal robot with the most advanced interoperative CT imaging, we are working to create surgical proceduralization of all key spine surgeries to create the standard of care across the spine industry. Our intellectual property portfolio has been number one in the spinal industry for the last decade, and Globus is committed to further expanding this lead, especially in the enabling tech arenas, as we continue to be at the forefront of imaging, navigation, and robotics. To accomplish this, we remain committed to continuing existing projects, and we’ll have an ongoing PD presence on the West Coast focused on spine and neuromonitoring solutions.”

4. LivaNova PLC (NASDAQ:LIVN)

Number of Hedge Fund Holders: 39 

LivaNova PLC (NASDAQ:LIVN) is a global medical technology company that develops and manufactures innovative devices for cardiovascular and neuromodulation treatments. The company focuses on creating breakthrough therapies for conditions affecting the head and heart. Its product range includes heart-lung machines, oxygenators, and neuromodulation systems, which are sold to hospitals, healthcare providers, and medical professionals worldwide.

LivaNova reported second-quarter revenue of $318.6 million, reflecting an 8.4% increase on a reported basis and 9.6% on a constant-currency basis year-over-year. Excluding the Advanced Circulatory Support segment’s wind down, revenue growth was 10.8% in constant currency. Key drivers of this growth included a 12.7% increase in Cardiopulmonary revenue to $173.7 million, fueled by strong sales of the Essenz Perfusion System, and a 7.3% increase in Neuromodulation revenue to $142.9 million, attributed to growth across all regions.

LivaNova PLC (NASDAQ:LIVN)’s profitability metrics also improved significantly, with U.S. GAAP operating income rising to $40.2 million from $17.4 million, and diluted EPS increasing to $0.30 from $0.02 in Q2 2023. Adjusted operating income and diluted EPS also saw notable increases, reaching $66.9 million and $0.93, respectively.

As of Q2, 2024, 39 hedge funds in the Insider Monkey database held shares in the stock. The largest stakeholder in the stock among these was Millennium Management, holding shares worth $152,179,278. LivaNova’s stock holds a strong buy rating, with 7 Wall Street analysts providing 12-month price targets in the last 3 months. The average price target is $70.57, with a high of $80.00 and a low of $61.00, indicating a potential 31.73% increase from the current price of $53.57.

3. GE Healthcare Technologies Inc. (NASDAQ:GEHC)

Number of Hedge Fund Holders: 49 

GE Healthcare Technologies Inc. (NASDAQ:GEHC) is a global leader in medical technology, focusing on advanced imaging, ultrasound, and patient care solutions. The company produces a variety of healthcare products, including CT scanners, MRI machines, X-ray systems, and ultrasound devices, along with digital healthcare IT and AI-enabled technologies. GE HealthCare primarily serves hospitals, clinics, and healthcare providers worldwide.

The company is expanding its product portfolio with innovations like the LOGIQ E10 Series ultrasound featuring AI solutions, the Deep Learning portfolio for CT imaging, and real-time collaboration tools for radiology teams. Additionally, GE Healthcare is developing products for emerging markets, such as a $1,000 handheld ECG device for rural India and a portable ultrasound machine for rural China, which also have applications in developed markets. The company is forming value-based partnerships with healthcare providers to drive technological transformation, improve patient outcomes, and support long-term revenue growth.

GE Healthcare Technologies Inc. (NASDAQ:GEHC) reported revenues of $4.8 billion in Q2 2024, remaining flat year-over-year but achieving 1% organic growth driven by positive pricing and volume, despite challenges in the Chinese market. Profitability improved in Q2, with net income margin rising to 8.9% from 8.7% and adjusted EBIT margin expanding to 15.3% from 14.8%, primarily due to productivity gains and favorable pricing strategies. Diluted EPS increased to $0.93, while adjusted EPS rose to $1.00, reflecting 8.7% year-over-year growth driven by higher EBIT and lower interest expenses.

The company’s growth catalysts include strategic collaborations, such as a partnership with AWS to advance healthcare transformation using generative AI, plans to acquire a clinical AI business from Intelligent Ultrasound, the launch of new products like the MIM Symphony HDR Prostate for MR image guidance, and expanded partnerships with organizations like Tampa General Hospital to enhance patient and clinician outcomes across Florida.

As of Q2, 2024, 49 hedge funds in the Insider Monkey database held shares in the stock. GE Healthcare Technologies Inc. holds a moderate buy rating, with 12 Wall Street analysts providing 12-month price targets over the last 3 months. The average price target is $95.25, with a high of $105.00 and a low of $74.00, indicating a potential 4.28% increase from the current price of $91.34.

2. Becton, Dickinson and Company (NYSE:BDX)

Number of Hedge Fund Holders: 65 

Becton, Dickinson and Company (NYSE:BDX) is a global medical technology company that develops, manufactures, and sells a diverse array of medical supplies, devices, laboratory equipment, and diagnostic products. The company provides essential tools and technologies utilized by healthcare professionals, researchers, and patients worldwide.

Becton, Dickinson and Company (NYSE: BDX) offers a diverse range of products, including drug detectors, catheters, inventory optimization systems, and drug collection products. With trailing twelve-month revenues of $19.8 billion and cash equivalents of $1.4 billion, the company benefits from economies of scale that help maintain high margins. However, these economies also require consistent revenue growth to avoid margin compression from high operating expenses. The stock has declined 3.4% year-to-date, primarily due to flat international revenue of $2.1 billion, which accounts for 42% of sales, largely affected by a slowdown in China. Additionally, the company’s pharmaceutical and biomedical segments have not shown growth, leading to a modest 3.2% revenue increase over the nine months ending in June, while expenses rose by 3.5%.

To mitigate some of its growth challenges, Becton, Dickinson and Company (NYSE:BDX) is focusing on acquisitions. Here’s what management shared on this front during the Q3 2024 earnings call:

“Today, BD has a $4 billion-plus business in health care automation and informatics AI and we’ll increase this to over $5 billion as we complete the acquisition of Critical Care. This expands BD in the smart critical care space and creates new opportunities to combine AI-driven monitoring with systems such as infusion technologies to simplify nursing workflow and improve patient care. Looking ahead to 2030, we view health care process automation and informatics AI as having the potential to become a business exceeding $7 billion as we continue to build more connected, automated, and intelligent solutions to transform the core processes underlying care delivery.”

1. Boston Scientific Corporation (NYSE:BSX)

Number of Hedge Fund Holders: 82 

Boston Scientific Corporation (NYSE: BSX) is a leading global medical device manufacturer offering products such as stents, catheters, and cardiac monitors in over 100 countries. The company specializes in technologies like pulsed-field ablation (FPA), which enables targeted treatment while preserving organ structure. The launch of its Farapulse FPA product in January contributed to a 17% revenue growth in the U.S. in Q2, and global regulatory approval for Farapulse could further enhance its performance. Boston Scientific’s shares have risen 44% year-to-date.

Boston Scientific Corporation (NYSE:BSX) was mentioned by Artisan Partners in their investor letter dated Q2 2024. The fund said as follows:

“Boston Scientific is a global developer, manufacturer, and marketer of medical devices that are used in a broad range of interventional medical specialties. The company develops cardiovascular and cardiac rhythm management products, including imaging catheters, imaging systems, and guidewires. It also makes devices used for electrophysiology, endoscopy, pain management (neuromodulation), urology, and pelvic health, including laser systems, hydrogel systems, and brain stimulation systems. Boston Scientific markets its products in about 130 countries; the U.S. generates about 60% of its revenue.

We believe Boston Scientific, as a leader in medical devices, is benefiting from the strong utilization trends coming out of COVID-19, positive demographic trends with aging patients, and new product innovation to gain market share. The company has executed well against the long-range plan issued last fall, which calls for organic sales growth in the range of 8%-10%, 150 basis points of operating margin expansion, and category leadership over the period 2024 through 2026. Additionally, we see a consistent track record of accelerating organic sales growth and a track record of accretive M&A.”

As of Q2, 2024, 82 hedge funds in the Insider Monkey database held shares in the stock, with Citadel Investment Group having the largest stake among these, holding 12,499,867 shares worth $962,614,757. Boston Scientific holds a strong buy rating, with 19 Wall Street analysts providing 12-month price targets over the last 3 months. The average price target is $90.94, with a high of $100.00 and a low of $78.00, indicating a potential 3.26% increase from the current price of $88.07.

“Overall, BSX ranks first among the 12 best quantum computing stocks to buy now. While we acknowledge the potential of quantum computing companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GOOGL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.”

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