We recently published a list of 10 Best Medical Stocks to Buy Now. In this article, we are going to take a look at where Thermo Fisher Scientific Inc. (NYSE:TMO) stands against other best medical stocks to buy now.
Navigating the Healthcare Landscape: Investment Opportunities and Growth Trends
The medical and healthcare industry is one of the largest globally, with a steady demand for products and services due to the biological nature of humans. Stocks like Pfizer Inc. (NYSE:PFE) and Tenet Healthcare Corporation (NYSE:THC) are among the biggest in the world, benefiting from trends that arise during crises like the coronavirus pandemic. Following the pandemic’s rapid spread in 2020, investors were eager to identify the best medical stocks to navigate the global healthcare crisis.
This industry is highly capital-intensive and competitive, encompassing various subsectors, including pharmaceutical companies, healthcare plan providers, medical equipment manufacturers, and hospitals. While healthcare plan providers and pharmaceutical firms often capture consumer attention, hospitals tend to be overlooked, despite their status as publicly traded entities. According to McKinsey, the medical industry’s overall profits are projected to grow at a compound annual growth rate (CAGR) of 4%, increasing from $654 billion in 2021 to $790 billion by 2026. Notably, the hospital sector is expected to grow at a remarkable CAGR of 12.5%, reaching $2 trillion by 2028. Similarly, the pharmaceutical manufacturing segment, valued at $358 billion in 2020, is forecasted to surge to $1.2 trillion by 2030, reflecting a CAGR of 13%.
Over time, medical companies such as Pfizer and Moderna, Inc. (NASDAQ:MRNA), a biotechnology company based in Cambridge, Massachusetts, were among the most sought-after due to their vaccines. On the stock market, Moderna’s shares increased by an astounding 429% between December 2019 and September 2021. This outcome demonstrates that even modest wagers placed at the ideal moment can provide investors from all backgrounds with large returns. During the same period, Pfizer’s stock saw a more moderate 50% gain; nevertheless, the gap in gains is comprehensible given that Pfizer currently has a market value of more than four times that of Moderna, at $155 billion.
Our Methodology
For our methodology, we first sifted through the US pharmaceutical, medical devices, and healthcare ETFs and selected stocks that were weighted the highest. After choosing these stocks, we ranked them based on their total number of hedge fund holders as of Q2 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 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 workstation in a research lab stocked with laboratory products and services.
Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Fund Holders: 108
Thermo Fisher Scientific Inc. (NYSE:TMO), a prominent American company in biotech and life sciences, offers a diverse range of products and services. The company has seen significant expansion, largely fueled by key acquisitions such as Life Technologies and Affymetrix. Among its notable investors are billionaires Ken Fisher, Ken Griffin, and Israel Englander.
The company’s Q2 2024 revenue of $10.5 billion represented a 1.3% year-over-year reduction, although it was still $23.4 million higher than analysts had predicted. Thermo Fisher’s free cash flow increased to $1.7 billion from $1.26 billion, while operating cash flow improved to $1.96 billion from $1.54 billion in the prior year.
Regarding Thermo Fisher Scientific Inc. (NYSE:TMO), Polen Focus Growth Strategy made the following statement in its investor letter for the first quarter of 2024:
“We increased our positions in Thermo Fisher Scientific Inc. (NYSE:TMO), Visa, Zoetis, Nike, and Abbott Labs. Each of these companies is durable and available at attractive valuations, in our view, for the growth we see ahead. In fact, in the case of ThermoFisher, Nike, and Abbott Labs, we expect accelerating earnings growth in the back half of 2024 after more difficult earnings growth periods pass for each of these companies. ThermoFisher and Abbott will finally wind down most of their COVID-19 testing and vaccine-related efforts due to a lack of demand, so these should no longer be revenue growth headwinds.”
As of Q2 2024, 108 hedge funds out of the total number we tracked held stakes in the stock with Fisher Asset Management being the largest one of these with shares worth $1,421,748,082. The stock holds a Strong Buy rating. 17 Wall Street analysts set a 12-month average price target of $658.94 for Thermo Fisher, with forecasts ranging from $600.00 to $767.00, indicating a potential 9.86% increase from the current price of $599.78.
Overall, TMO ranks 2nd on our list of best medical stocks to buy now. While we acknowledge the potential of TMO 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 TMO 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.
