12 Best Healthcare Stocks For the Long-Term
In this piece, we will take a look at the 12 best healthcare stocks for the long term. If you want to skip our overview of the healthcare industry, then you can take a look at 5 Best Healthcare Stocks For the Long-Term.
The healthcare industry is one of the biggest industries in the world. Its products range from everyday generic medicines to the highly technological genetic engineering and biotechnology industries. In terms of monetary value, the global healthcare industry is slated to be worth $7.3 trillion by the end of this year, after growing at a compounded annual growth rate (CAGR) of 21.92%. The sector is quite unique in the sense that within the healthcare segment, there are several specific highly valuable markets each of which cater to the needs of different niches. For instance, one sector is the healthcare services market which was worth $10.3 trillion in 2021 and is expected to post a CAGR of 8.2% between 2023 and 2030 for a final value of $21 trillion.
2023 has seen healthcare return to normalcy after it soared to record highs on the stock market during the coronavirus pandemic. However, with the advent of A.I., there are several potential catalysts in the waiting as well. A.I. can disrupt the healthcare industry in nearly every end of the supply chain. Starting from downstream, one of the biggest use cases for A.I. comes in the form of enabling drug discovery. A.I. and machine learning models are capable of sifting through vast sums of data and information to generate inferences, and this allows researchers to combine ingredients to check whether any new drugs can be discovered. Moving further upstream, A.I. can also enable healthcare service providers such as hospitals to sift through patient data and discover new patterns.
These use cases are also on the mind of the consulting firm McKinsey. The U.S. healthcare system is one of the largest in the world and is infamous for its high costs that result in absurd prices for non insured patients. McKinsey believes that by employing generative A.I., automation, and analytics, could lead the healthcare industry to save anywhere between $200 billion and $360 billion in administrative functions, and could lead to lower burnout for doctors to eventually improve patient outcomes.
One of the biggest drivers of corporate spending and risk in the healthcare industry is research and development for drug discovery. The process is quite tedious and it requires companies such as Pfizer Inc. (NYSE:PFE) and Eli Lilly and Company (NYSE:LLY) to invest millions if not billions of dollars and then take the gamble of clinical trials to convince regulatory bodies such as the Food and Drug Administration (FDA) to approve drugs for mass market use. Within this cycle, a randomized clinical trial is one of the most important processes and also one of the most time consuming ones. McKinsey believes that by using A.I. healthcare firms can utilize real world data in mass volumes to improve the chances of clinical trial success by matching the right patients with the right drug combination and enabling better decisions about patient selection.
Shifting gears to focus on the latest healthcare industry news, just like A.I. has piqued interest in the technology industry, the pharmaceutical sector of the healthcare industry has been dealing with its own revolution. This has come in the form of weight loss drugs, which are repurposed diabetes medications that work with insulin production to give the user the feeling of being full. Right now, there are three 'premier' weight loss drugs. Two of these, Wegovy and Ozempic, are made by the pharmaceutical giant Novo Nordisk A/S (NYSE:NVO). Both use the same primary ingredient and the only difference between them is their strength. The third weight loss drug is Eli Lilly's Mounjaro, which is selling like hot cakes if we believe the company's management. Mounjaro raked in a cool $1.4 billion in revenue for Eli Lilly during 2023's third quarter, and sources quoted by Reuters believe that the firm plans to invest as much as $2 billion in Germany to beef up Mounjaro's supply. This plant will mark the firm's first major production in the European economic giant, and while the sources did not explicitly mention the weight loss drug by name, they added that it would focus on making diabetes drugs that could also help with weight loss.
So, as the healthcare industry looks to the post COVID world, we decided to take a look at which healthcare stocks might be suitable for the long term. Some top picks are InMode Ltd. (NASDAQ:INMD), Centene Corporation (NYSE:CNC), and The Cigna Group (NYSE:CI).
Photo by martha-dominguez-de-gouveia on Unsplash
Our Methodology
To compile our list of the best healthcare stocks for the long term, we first made a list of healthcare stocks with a price to earnings ratio lower than 20 and five year average revenue growth higher than 25%. Then, they were sorted by the number of hedge funds that had bought their shares during Q3 2023 and the top healthcare stocks are as follows.
Best Healthcare Stocks For the Long-Term
12. Semler Scientific, Inc. (NASDAQ:SMLR)
Number of Hedge Fund Investors In Q3 2023: 9
Latest P/E Ratio: 16.76
5-Yr Average Annualized Revenue Growth: 35.41%
Semler Scientific, Inc. (NASDAQ:SMLR) is a small medical devices company headquartered in Santa Clara, California. It enables medical practitioners to measure blood flow, and insulin, and carry out other functions. The firm has beaten analyst EPS estimates in all four of its latest quarters, and the shares are rated Buy on average.
By the end of this year's third quarter, nine out of the 910 hedge funds part of Insider Monkey's database had bought and owned Semler Scientific, Inc. (NASDAQ:SMLR)'s shares. Touk Sinantha's AltraVue Capital was the biggest shareholder in our database courtesy of its $3 million investment.
Semler Scientific, Inc. (NASDAQ:SMLR) joins Centene Corporation (NYSE:CNC), InMode Ltd. (NASDAQ:INMD), and The Cigna Group (NYSE:CI) in our list of the top healthcare stocks for the long term.
11. MorphoSys AG (NASDAQ:MOR)
Number of Hedge Fund Investors In Q3 2023: 12
Latest P/E Ratio: 10.38
5-Yr Average Annualized Revenue Growth: 33.03%
MorphoSys AG (NASDAQ:MOR) is a German biotechnology company that is developing cancer and tumor treatments. The firm's shares were under pressure in November 2023 after a trial of its bone marrow cancer drug failed to impress investors.
Insider Monkey's September quarter of 2023 survey covering 910 hedge funds revealed that 12 had bought the firm's shares. Out of these, the largest investor was James A. Silverman's Opaleye Management due to its $8.1 million stake.
10. Zynex, Inc. (NASDAQ:ZYXI)
Number of Hedge Fund Investors In Q3 2023: 13
Latest P/E Ratio: 19.28
5-Yr Average Annualized Revenue Growth: 46.51%
Zynex, Inc. (NASDAQ:ZYXI) makes and sells medical devices that are used in muscular and nervous system stimulation. It is the first stock on our list that is rated Strong Buy on average, and analysts have set an average share price target of $19.13 for a rough $11 share price upside.
During this year's September quarter, 13 hedge funds out of the 910 tracked by Insider Monkey had invested in the company. Israel Englander's Millennium Management owned Zynex, Inc. (NASDAQ:ZYXI) shares that were worth $7.5 million, making it the firm's biggest shareholder.
9. Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT)
Number of Hedge Fund Investors In Q3 2023: 17
Latest P/E Ratio: 6.11
5-Yr Average Annualized Revenue Growth: 73.74%
Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT) is a biotechnology company developing treatments for liver and respiratory system ailments. It scored a win in November 2023 when the FDA classified its fibrosis drug as an orphan drug, opening up the avenue for government support.
After digging through 910 hedge funds for their third quarter of 2023 shareholdings, 17 out of the 910 hedge funds profiled by Insider Monkey were Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT)'s shareholders. Out of these, the largest investor was Catherine D. Wood's ARK Investment Management as it owned 1.9 million shares that are worth $45.5 million.
8. Voyager Therapeutics, Inc. (NASDAQ:VYGR)
Number of Hedge Fund Investors In Q3 2023: 18
Latest P/E Ratio: 6.41
5-Yr Average Annualized Revenue Growth: 21.35%
Voyager Therapeutics, Inc. (NASDAQ:VYGR) is an American firm focusing on treating Alzheimer's Disease, sclerosis, and other ailments. Nearly three quarters of its stock is owned by either institutional investors or insiders, hinting that perhaps there might be potential growth catalysts ahead.
Insider Monkey took a look at 910 hedge funds for their investments during this year's September quarter an found that 18 had bought the firm's shares. Voyager Therapeutics, Inc. (NASDAQ:VYGR)'s biggest stakeholder among these is Steven Boyd's Armistice Capital due to its $32.3 million investment.
7. Cross Country Healthcare, Inc. (NASDAQ:CCRN)
Number of Hedge Fund Investors In Q3 2023: 18
Latest P/E Ratio: 7.42
5-Yr Average Annualized Revenue Growth: 26.54%
Cross Country Healthcare, Inc. (NASDAQ:CCRN) works in the human resource segment of healthcare as it aids healthcare facilities with their staffing needs. The firm's third quarter financial results saw it report a 30% annual revenue drop as its clients readjusted their staffing needs.
During September 2023, 18 out of the 910 hedge funds part of Insider Monkey's database had held a stake in Cross Country Healthcare, Inc. (NASDAQ:CCRN). Chuck Royce's Royce & Associates owned the largest stake which was worth $22.5 million.
6. BioNTech SE (NASDAQ:BNTX)
Number of Hedge Fund Investors In Q3 2023: 19
Latest P/E Ratio: 5.19
5-Yr Average Annualized Revenue Growth: 208.85%
BioNTech SE (NASDAQ:BNTX) is a German company developing treatments for a wide variety of cancers and tumors. The stock was in a bit of trouble in December 2023 after JPMorgan cut its price target to $99 from $106 and reduced the share rating to Underweight from Neutral.
As of Q3 2023, 19 out of the 910 hedge funds covered by Insider Monkey's research had bought the firm's shares. BioNTech SE (NASDAQ:BNTX)'s biggest hedge fund shareholder is Israel Englander's Millennium Management due to its $54.1 million investment.
BioNTech SE (NASDAQ:BNTX), nMode Ltd. (NASDAQ:INMD), Centene Corporation (NYSE:CNC), and The Cigna Group (NYSE:CI) are some top healthcare stocks for the long term.
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Disclosure: None. 12 Best Healthcare Stocks For the Long-Term is originally published on Insider Monkey.
