Should You Follow Hedge Funds Into These Healthcare Stocks?

Healthcare is a vast sector that nonetheless has huge growth prospects, with the U.S government and its citizens spending about $3 trillion annually in an attempt to stay healthy. The Health Care Select Sector SPDR ETF (XLV), which tracks the performance of the healthcare sector, rose by nearly 1.4% during April and has gained over 8% during the past year, despite mounting fears that drug prices could be reined in by government decree.

Thus, if one can invest in healthcare stocks wisely, they’re likely to enjoy impressive gains. But which healthcare stocks to buy remains the million-dollar question. At Insider Monkey, we believe in mimicking smart money managers and picking only their best stock positions. Hedge funds are like many other companies, they bundle products (in this case, stock picks) together and sell them to investors as a package deal. That means you get their 50th-best pick along with their best pick, and who wants to pay an arm and a leg in fees for that 50th-best pick?

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We’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (see details here).

We cut through the fees to get right to hedge funds’ top picks, and in this article we’ll use that same approach to dissect healthcare stocks, revealing the five stocks which are the most popular among the 700+ successful hedge funds in our database. Check out the list beginning on the next page.