We recently published a list of 8 Most Promising Medical Stocks According to Hedge Funds. In this article, we are going to take a look at where Becton, Dickinson and Company (NYSE:BDX) stands against other most promising medical stocks.
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.
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).”
A surgeon performing a procedure in an operating room using a medical device supplied by the company.
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.”
Overall, BDX ranks 2nd on our list of most promising medical stocks according to hedge funds. While we acknowledge the potential of BDX as an investment, 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 BDX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.