We recently published a list of 12 Best German Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Fresenius Medical Care (NYSE:FMS) stands against other best German stocks to buy according to hedge funds.
Germany’s economy is facing continued weakness. According to a report published by Roland Berger, the 0.1% contraction in 2023 and the 0.2% in 2o24 will only be countered by a 0.4% projected growth in 2025. While manufacturing orders are recovering modestly since June last year, business sentiments are still low and the industrial production for November was down 3,1% year-over-year. Unemployment also reached 2.81 million in December 2024, which was a 170,000 increase as compared to the same period last year. This pushed the unemployment rate to 6%. Inflation is now expected to average 2% in 2025, which is still down from the 2.2% figure from 2024.
Earlier on March 6, Chris Verrone, Strategas, joined CNBC’s ‘Fast Money’ to express his bullish outlook on the European market. He highlighted a shift in global cyclicality eastward and observed that the European industrials are achieving new highs. Verrone emphasized that the European banks have shown strength over the past 18 months but despite such trends, investors are still not heavily leaning towards European equities. He cited the German ETF under the name of EWG to support his stance, as EWG broke a 20-year high which indicated its departure from prolonged secular stagnation particularly within banks and industrials. However, he did note that energy and basic resources are not showing the same momentum.
The conversation also covered the fact that investors have been overweight in US large-cap tech stocks over the past 12 to 13 years. Verrone relayed that observed extreme bearishness towards the European market as of December 2024, when he visited the region. He particularly noted that peripheral European markets, which include countries like Italy and Spain, have been leading. Whereas Germany has lagged. While Verrone mentioned that he heard Christine Lagarde, President of the European Central Bank, expressed pessimism about the European economy herself during the world economic forum in Davos, he still maintains his bullish outlook. He thinks that the European economic data is improving and global cyclicality has not been extinguished.
Our Methodology
We used the Finviz stock screener to compile an initial list of top German stocks. We then selected 12 German stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A medical doctor surrounded by advanced technology in the operating room.
Fresenius Medical Care (NYSE:FMS)
Number of Hedge Fund Holders: 11
Fresenius Medical Care (NYSE:FMS) provides dialysis products and services and offers care for patients with chronic kidney disease. Its services range from operating outpatient dialysis clinics and providing home dialysis support to developing and distributing essential dialysis equipment and pharmaceuticals. It also offers related medical services like vascular care and renal pharmaceuticals.
The Care Delivery segment contributed to the company’s turnaround in 2024 and achieved a 10.7% operating income margin, which surpassed the 10% target. This resulted from positive price and volume effects, productivity gains, labor efficiency enhancements, and a focused international portfolio. US same-market treatment growth turned positive for the full year and reached 0.5% in Q4 2024. The segment mitigated weather-related impacts to just 0.05% in Q3 and Q4.
For 2025, Fresenius Medical Care (NYSE:FMS) projects positive US market treatment growth above 0.5%, which is expected to be driven by the rollout of the 5008X hemodiafiltration machine. This is an advanced medical device used in dialysis to filter waste products from the blood. It offers improved treatment efficiency compared to traditional hemodialysis. Revenue is expected to increase by around €100 million from the value-based care business and reach about €1.9 billion in 2025.
Ariel Global Fund sees the market’s fear regarding GLP-1 drugs impacting dialysis demand as overblown. The fund thinks this presents a buying opportunity for Fresenius Medical Care (NYSE:FMS) and stated the following in its fourth quarter 2023 investor letter:
“We added positions in, leading providers of dialysis services, DaVita, Inc. and Fresenius Medical Care AG (NYSE:FMS). Fresenius Medical Care AG & Co. is the worldwide leader in the treatment of renal disease, while Davita, Inc. administers its services to over 2,700 outpatient dialysis centers across 45+ states and operates over 350 outpatient dialysis centers in 12 total countries. The shares of each company came under pressure following the release of clinical data on the efficacy of glucagon-like-peptide-1 (GLP-1) weight-loss drugs and their potential to negatively impact the demand for dialysis, providing us with attractive entry points in both names. Even assuming high rates of both uptake and effectiveness, we believe the overall impact on dialysis volumes will be small in the near-to-medium term. We also think the cardio protective effects of the GLP-1 class may enable patients to live longer, thereby increasing the overall size of the end-stage renal disease incidence pool. We believed the market misunderstood the actual long-term clinical impact on dialysis and were able to purchase at attractive valuation levels.”
Overall, FMS ranks 7th on our list of best German stocks to buy according to hedge funds. While we acknowledge the growth potential of FMS, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than FMS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.