We recently compiled a list of the 7 Best Mid-Cap Healthcare Stocks To Buy Now and in this article we will dissect whether Insmed Incorporated (NASDAQ:INSM) is a top healthcare pick of elite hedge funds.
Challenges in the Health Sector
The healthcare industry is considered to be a fairly defensive sector due to its need. According to a World Health Organization report from December 2023, global health spending reached a new high in 2021 at $9.8 trillion or 10.3% of global gross domestic product (GDP). However, spending distribution remained highly unequal, with public health spending increasing worldwide, except in low-income countries where government health spending declined as it relied heavily on external health aid. In 2021, 11% of the global population lived in countries spending less than $50 per person annually on health, while high-income countries spent around $4,000 per capita. Additionally, low-income countries, despite having 8% of the global population, accounted for only 0.24% of global health expenditure. The report states that while there was a significant increase in public spending on health during the peak of the COVID-19 pandemic, this growth is unlikely to be sustained over the long term as countries now focus on economic challenges like slowing growth, high inflation, and increased debt servicing. Dr Bruce Aylward, WHO Assistant Director-General, Universal Health Coverage, Life Course said:
“Sustained public financing on health is urgently needed to progress towards universal health coverage. It is especially critical at this time when the world is confronted by the climate crisis, conflicts and other complex emergencies. People’s health and well-being need to be protected by resilient health systems that can also withstand these shocks.”
Apart from that, due to the residual effects of the COVID-19 pandemic, the healthcare industry has also been facing challenges such as labor shortages and high costs. Our article about the best healthcare ETFs covers this extensively.
Adversity Drives Innovation
While the broader market has outperformed the healthcare sector by a huge margin over the last year, healthcare companies have been putting in their work to drive innovation in the industry. AI and other technologies are the driving forces for these companies. However, some of the companies have been using these technologies for longer. For example, Pfizer has been using AI in pharmacovigilance since 2014. The company also uses AI to analyze vast datasets, predict treatment outcomes, and streamline clinical development processes. The company made the following comments in one of its reports:
“If the ultimate goal of a self-driving car is to navigate a busy city street, in pharmaceutical research, the goal is to navigate the connections between a potential treatment and its effectiveness in treating a disease.”
On May 21, AstraZeneca’s CFO Aradhana Sarin told CNBC that the healthcare company is in a “new era of growth.” The company is expected to generate a revenue of $80 billion by 2030. Sarin said in the interview that the company is expecting to launch 20 potential new drugs by that time, and a number of them could potentially be $5 billion drugs. The CFO mentioned several upcoming innovations for the company, such as replacing chemotherapy with antibody-drug-conjugates (ADCs) and radiation therapies with radiopharmaceuticals. At its Q1 2024 earnings call, the biopharmaceutical giant’s CEO, Pascal Soriot said:
“Today is what do we intend to deliver in terms of our financial progression in ’24, ’25, ’26. Tomorrow is what are the products we are going to launch that will drive our growth between 2025 and 2030, and what is our strategy there, what do we intend to do with our pipeline, and what other products we believe are growth drivers to 2030. And the day after tomorrow is really the sort of post-2030 period. And what are — what do we believe are the technologies that will shape the future of medicine in oncology and beyond, and how are we building some of those platforms that will help us shape — participate in shaping the future of medicine in the therapy areas where we are.”
A close-up of a hand holding a vial of biopharmaceutical drugs ready to be administered.
Our Methodology
For this article, we used the Finviz stock screener to identify nearly 140 healthcare companies with market capitalizations between $2 billion and $10 billion. We narrowed down our list to 7 stocks that were most widely held by institutional investors. The best mid-cap healthcare stocks are listed in ascending order of their hedge fund sentiment.
The hedge fund data was taken from Insider Monkey’s database of 919 elite hedge funds as of the first quarter of 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 best hedge funds. Our quarterly newsletter’s strategy picks 14 small and large-caps every quarter and it has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Is Insmed Incorporated (NASDAQ:INSM) the Best Healthcare Stock?
Insmed Incorporated (NASDAQ:INSM)
Number of Hedge Fund Holders: 48
Insmed Incorporated (NASDAQ:INSM) is a New Jersey-based company engaged in the development and commercialization of therapies for people who have serious and rare diseases.
Insmed Incorporated (NASDAQ:INSM) has received Buy ratings from 12 Wall Street analysts. As of May 24, the average price target of $46.27 has an upside of 110.32% from the last price of $22.00. On May 13, Mizuho analyst Graig Suvannavejh raised the price target on the stock to $36 from $35 and kept a Buy rating on the shares.
In the first quarter, 48 hedge funds held positions in Insmed Incorporated (NASDAQ:INSM) and their stakes amounted to $690.103 million. As of March 31, Deep Track Capital is the biggest shareholder in the company and has a position worth $129.781 million.
ClearBridge Investments mentioned Insmed Incorporated (NASDAQ:INSM) in its first quarter 2024 investor letter:
“Encouragingly, we are seeing underlying improvements from companies we do own in the portfolio, with several being recent portfolio additions or subjects of repositioning work executed in 2023.
The first quarter represented another period of fruitful new idea generation with nine new investments. Consistent with historical practice, these initial investments represent modest position sizes that we intend to build over time.
Insmed Incorporated (NASDAQ:INSM) is a biopharmaceutical company focused primarily on rare pulmonary diseases. The company has an approved and marketed product still growing in domestic and international markets, along with opportunities to expand its initial indication. Moreover, the company has several late-stage clinical candidates with blockbuster sales potential.”
Insmed Incorporated (NASDAQ:INSM) takes the 6th spot on our list of best mid-cap healthcare stocks to buy. To learn about hedge funds’ top healthcare picks, check out our free report on the 7 Best Mid-cap Healthcare Stocks To Buy Now.
If you are looking for an AI stock that is as promising as Microsoft 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 on Insider Monkey.