15 Best Drug Stocks To Invest In
In this article, we discuss the 15 best drug stocks to invest in. You can skip our detailed analysis of the drug and pharmaceutical sector and its outlook this year, and go directly to read the 5 Best Drug Stocks To Invest In.
Healthcare expands on the defensive concept, encompassing a myriad of companies. This includes those providing patient care, engaging in research and development of novel treatments, and designing, manufacturing, and commercializing diagnostic equipment and tests used in the sector. Advances in medical technology, pharmaceuticals, and treatment methodologies have revolutionized patient care and outcomes. Pharmaceutical companies, in particular, have gained substantial public attention, given the heightened urgency to rapidly deliver results.
Pharmaceutical firms are commonly classified as defensive because they produce vital health maintenance and illness treatment products. The demand for these goods tends to remain relatively stable, even in the face of economic downturns. Notably, the sector yielded favorable returns for investors in 2022, a period marked by the S&P 500's weakest annual performance since 2008. From December 2021 to December 2022, the NYSE Arca Pharmaceutical Index recorded a gain of 4.91%, standing in stark contrast to the S&P 500's notable 19.4% decline. Over the past five years, the index has experienced a substantial increase of 49.85%.
As per a Grand View Research report, the global pharmaceutical manufacturing market reached an approximate value of $516.48 billion in 2022 and is forecasted to achieve a compound annual growth rate (CAGR) of 7.63% from 2023 to 2030. The growing number of drug approvals granted by regulatory authorities is expected to drive advancements in drug manufacturing processes. Notably, in 2022, the FDA approved 37 novel drugs, indicating a positive trend. Moreover, the pharmaceutical sector has witnessed a notable surge in mergers and acquisitions (M&As) in recent years. Established companies are strategically consolidating to strengthen their market position in the highly competitive landscape.
The global pharmaceutical industry is poised for substantial growth in the future. In a similar vein, some of the best drug stocks in the industry include Pfizer Inc. (NYSE:PFE), Eli Lilly and Company (NYSE:LLY), and Johnson & Johnson (NYSE:JNJ), among others listed below.
A display of drug products in a specialty pharmacy, to demonstrate the widespread availability of the company's products.
Our Methodology
In curating our selection of the best drug stocks to invest in, we extensively reviewed Insider Monkey's Q3 2023 database to pinpoint industry leaders assessed by hedge fund sentiment. The companies listed below, ranked by the prevalence of hedge funds holding their shares, provide pharmaceutical products and services either domestically in the United States or internationally.
15. GSK plc (NYSE:GSK)
Number of Hedge Fund Holders: 42
GSK plc (NYSE:GSK), derived from its previous name GlaxoSmithKline plc, is a multinational pharmaceutical and biotechnology company based in the United Kingdom, with its global headquarters situated in London. The company achieved a notable success in September with the FDA approval of its anemia treatment. A substantial portion of its stock listed on the London Exchange is owned by institutional investors, constituting 45% of the shares.
The financial results from GSK plc (NYSE:GSK) exceeded expectations in the third quarter, primarily propelled by strong performances in specialty medicines and the Shingrix shingles vaccine. Initially, this news led to an increase in GSK stock, but by the close of the market, shares declined in line with overall market trends. The collective sales of specialty medicines saw a significant 24% increase in constant currency. Additionally, the Shingrix vaccine contributed to sales of 760 million pounds, approximately $874.7 million. Consequently, GSK plc (NYSE:GSK) adjusted its outlook, anticipating sales growth of 8%-10%, excluding the impact of exchange rates.
As part of their shareholdings for this year’s third quarter, 42 among the 910 hedge funds profiled by Insider Monkey had invested in the firm. GSK plc (NYSE:GSK)’s biggest hedge fund investor is Ken Fisher’s Fisher Asset Management through its $493 million investment.
Much like Pfizer Inc. (NYSE:PFE), Eli Lilly and Company (NYSE:LLY), and Johnson & Johnson (NYSE:JNJ), GSK plc (NYSE:GSK) ranks as one of the best drug stocks to invest in.
14. Cardinal Health, Inc. (NYSE:CAH)
Number of Hedge Fund Holders: 43
Cardinal Health, Inc. (NYSE:CAH) is a multinational healthcare services corporation headquartered in Dublin, Ohio that holds a prominent position as one of the top revenue-generating companies in the United States. Specializing in the distribution of pharmaceuticals and medical products, the company extends its services to a network of over 100,000 locations.
In the first quarter of fiscal year 2024, Cardinal Health, Inc. (NYSE:CAH) reported a revenue of $54.8 billion, reflecting a 10% year-over-year increase. Within its medical segment, the company recorded revenue of $3.8 billion, which remained unchanged primarily due to decreased volumes and pricing in personal protective equipment (PPE). However, this was offset by growth in at-Home Solutions and inflationary impacts, including mitigation initiatives. Other notable results from the first quarter include non-GAAP net earnings attributable to Cardinal Health, Inc. (NYSE:CAH) reaching $433 million, compared to $328 million in the previous year, and non-GAAP operating earnings of $571 million, compared to $423 million. The company has also adjusted its guidance for fiscal year 2024, raising the range for non-GAAP diluted earnings per share to $6.75 to $7, up from $6.50 to $6.75.
At the conclusion of the third quarter in 2023, 43 hedge funds, as reported by Insider Monkey, held positions in Cardinal Health, Inc. (NYSE:CAH). This figure marks a slight decrease from the 44 hedge funds in the previous quarter. The combined value of these holdings surpassed $1.01 billion.
13. AstraZeneca PLC (NASDAQ:AZN)
Number of Hedge Fund Holders: 49
Headquartered at the Cambridge Biomedical Campus in Cambridge, England, AstraZeneca PLC (NASDAQ:AZN) is a multinational pharmaceutical and biotechnology company with both Anglo and Swedish roots. As of the year 2022, Tagrisso stands out as AstraZeneca's highest-grossing pharmaceutical product, primarily employed in treating non-small-cell lung carcinomas.
AstraZeneca PLC (NASDAQ:AZN) is set to join the competition in the development of a weight loss pill, collaborating with China's Eccogene to create an oral medication targeting conditions such as diabetes and obesity, affecting over 1 billion people globally. The agreement with Eccogene is valued at up to $2.01 billion, with an initial payment of $185 million granting exclusive global rights (excluding China) for the drug's development and marketing. An additional $1.83 billion will be paid based on the achievement of milestones. In the third quarter of 2023, AstraZeneca PLC (NASDAQ:AZN) reported a 13% growth in sales to $11.49 billion, surpassing expectations. This growth was driven by successes in oncology and rare diseases, key focus areas for the company. Sales of its Covid vaccine and antibody treatment remained at zero, compared to $716 million in the same period in 2022.
As of Q3 2023 end, 49 out of the 910 hedge funds part of Insider Monkey’s database had held a stake in AstraZeneca PLC (NASDAQ:AZN). Out of these, the firm’s largest shareholder is Rajiv Jain’s GQG Partners as it owns 14.04 million shares that are worth $951.18 million.
12. Gilead Sciences, Inc. (NASDAQ:GILD)
Number of Hedge Fund Holders: 55
Headquartered in Foster City, California, Gilead Sciences, Inc. (NASDAQ:GILD) is a U.S.-based biopharmaceutical company dedicated to researching and developing antiviral drugs for conditions such as HIV/AIDS, hepatitis B, hepatitis C, influenza, and COVID-19. Notable medications produced by Gilead Sciences include ledipasvir/sofosbuvir and sofosbuvir.
On October 17, Gilead Sciences, Inc. (NASDAQ:GILD) announced a 12-year collaboration with Assembly Biosciences, a biotechnology company specializing in advanced antiviral therapeutics for critical viral diseases. The partnership aims to advance novel antiviral treatments, with an initial focus on Assembly Bio's areas of expertise, including herpesviruses, hepatitis B virus (HBV), and hepatitis D virus (HDV).
Insider Monkey’s Q3 2023 survey covering 910 hedge funds revealed that 55 had bought and owned Gilead Sciences, Inc. (NASDAQ:GILD)’s shares. Cliff Asness’ AQR Capital Management is the biggest shareholder among these since it owns $357.7 million worth of shares.
ClearBridge Dividend Strategy made the following comment about Gilead Sciences, Inc. (NASDAQ:GILD) in its Q3 2023 investor letter:
“During the quarter we initiated positions in two new names: T-Mobile and Gilead Sciences, Inc. (NASDAQ:GILD). Gilead Sciences is a large biopharmaceutical company we have long followed given its dominant position in HIV treatment and strong intellectual property position. With pandemic-induced distortions on quarterly financials largely in the rearview mirror (Veklury — aka Remdesivir — was an overnight success as an antiviral treatment of COVID), we believe Gilead’s organic revenue growth potential over the next many years is in the mid-single digits. Gilead’s growth should be stable, as the company has no major patent expirations until the early 2030s.
While less growthy than some high-flying drug classes (e.g., diabetes/obesity), Gilead’s current valuation is undemanding, with a P/E barely in the double digits. We tend to shy away from health care investments whose valuation is dependent on pipeline drugs transforming into a large commercial opportunity, given the uncertain nature of drug discovery and the binary characteristic of the stock reactions. In Gilead’s case, we believe the market is ascribing virtually no value to its existing pipeline, in effect providing us with a “free” call option. Lastly, Gilead’s 4% (and growing) coupon should offer considerable downside support amid a more challenging market backdrop.”
11. McKesson Corporation (NYSE:MCK)
Number of Hedge Fund Holders: 58
A U.S.-based corporation, McKesson Corporation (NYSE:MCK) specializes in pharmaceutical distribution and provides health information technology, medical supplies, and care management solutions. Remarkably, the company supplies one-third of all pharmaceuticals used in North America and maintains a workforce exceeding 78,000 employees. The company currently pays a quarterly dividend of $0.62 per share and has a dividend yield of 0.55%, as of November 19.
The number of hedge funds tracked by Insider Monkey owning stakes in McKesson Corporation (NYSE:MCK) stood at 58 in Q3 2023, a slight decline from the previous quarter. The consolidated value of these stakes is over $2.95 billion.
Baron Health Care Fund made the following comment about McKesson Corporation (NYSE:MCK) in its Q3 2023 investor letter:
“Partially offsetting the above was favorable stock selection in pharmaceuticals and health care distributors along with cash exposure in a declining market. Strength in pharmaceuticals and health care distributors was driven by gains from Lilly and McKesson Corporation (NYSE:MCK). McKesson’s stock performed well due to strong financial results in the company’s pharmaceutical distribution and prescription technology solutions businesses, driven in part by higher volumes of GLP-1 medicines and prior authorization technology services related to GLP-1 medicines.”
10. Amgen Inc. (NASDAQ:AMGN)
Number of Hedge Fund Holders: 60
Amgen Inc. (NASDAQ:AMGN) is a global biopharmaceutical company involved in the research, development, manufacturing, and distribution of human therapeutics. Recognized as one of the notable pharmaceutical stocks, the company focuses on key areas such as oncology/hematology, inflammation, bone health, cardiovascular diseases, nephrology, and neuroscience. As of November 19, Amgen Inc. (NASDAQ:AMGN) offers a quarterly dividend of $2.13 per share, resulting in a dividend yield of 3.21%.
The number of hedge funds tracked by Insider Monkey reported having stakes in Amgen Inc. (NASDAQ:AMGN) stood at 60 in Q3 2023, an increase from the previous quarter's 57. The consolidated value of these stakes is over $2.16 billion.
Aristotle Capital Value Equity Strategy made the following comment about Amgen Inc. (NASDAQ:AMGN) in its Q3 2023 investor letter:
“Amgen Inc. (NASDAQ:AMGN), the biopharmaceutical company, was the top contributor for the quarter. The company continues to leverage its innovative platform to strengthen its product portfolio, offset maturing products, such as Epogen and Neulasta, and increase market share. Over the past year, Amgen has reported double‐digit volume growth, operating margin expansion to over 40% and record levels of sales for cholesterol drug Repatha, bone‐strengthening drug Prolia and cancer drug Blincyto. Additionally, the company remains well positioned to benefit from the continued development and commercialization of biosimilars such as Amgevita, the first biosimilar to Humira, and the successful integration of Otezla to bolster its inflammation segment. Lastly, the FTC agreed to allow Amgen to proceed with its $27.8 billion acquisition of Horizon Therapeutics. We note that this is yet another unsuccessful attempt by the FTC to block an M&A transaction of one of our holdings (see below re: Activision Blizzard). The transaction closed on October 6, 2023 and brings expertise in rare disease therapies (including bulging eye‐drug Tepezza), as well as adds to Amgen’s immunology portfolio.”
9. CVS Health Corporation (NYSE:CVS)
Number of Hedge Fund Holders: 64
Based in the U.S., CVS Health Corporation (NYSE:CVS) is a healthcare organization with its headquarters in the country, overseeing an extensive network of retail pharmacies and clinics nationwide. The company manages various brands, including CVS Pharmacy (a retail pharmacy chain), CVS Caremark (a pharmacy benefits manager), and Aetna (a health insurance provider).
In its third-quarter financial report, CVS Corporation (NYSE:CVS) exceeded Wall Street's expectations with adjusted earnings and revenue, buoyed in part by robust performance in the health services sector. For the quarter, CVS Corporation (NYSE:CVS) recorded sales of $89.76 billion, marking an almost 11% increase compared to the corresponding period the previous year. The company disclosed a net income of $2.27 billion, or $1.75 per share, for the third quarter. This stands in stark contrast to a net loss of $3.40 billion, or $2.59 per share, reported for the same period a year ago. Excluding specific items like amortization of intangible assets and capital losses, the adjusted earnings per share for the quarter were $2.21.
As of the close of the third quarter in 2023, data from Insider Monkey's database, which monitors 910 hedge funds, revealed that 64 hedge funds had positions in CVS Health Corporation (NYSE:CVS).
Coho Partners Relative Value Equity Fund made the following comment about CVS Health Corporation (NYSE:CVS) in its second quarter 2023 investor letter:
“In December of 2017, CVS Health Corporation (NYSE:CVS) agreed to buy Aetna, which broadened its offering by entering the managed care business. CVS has been moving its portfolio to a more value-based outcome model, and Aetna was a major move in that direction. We were willing to accept the leverage that came with the deal because CVS has a very cash generative model, and we anticipated the free cash flow would enable the company to de-lever fairly quickly.
By mid-2022, CVS was in a position to use the free cash flow that had been going to debt repayment to do bolt-on deals to further prepare for the value-based outcome model and/or return more cash to shareholders in the form of higher dividends or share repurchases. However, CVS lost a “star” in its largest Medicare plan in late 2022 and this will adversely impact earnings in 2024. This was a surprise and disappointment to us, but management should be able to regain the “star” in the back half of 2023, which will then give the company a nice tailwind in 2025…” (Click here to read the full text)
8. Bristol-Myers Squibb Company (NYSE:BMY)
Number of Hedge Fund Holders: 65
Bristol-Myers Squibb Company (NYSE:BMY) is a global biopharmaceutical entity engaged in comprehensive activities spanning research, development, licensing, manufacturing, marketing, and distribution of biopharmaceutical products. These products are crafted to address diverse medical conditions, including hematology, oncology, cardiovascular, immunology, fibrotic, and neuroscience diseases. Recognized as one of the premier pharmaceutical stocks in the market, Bristol-Myers Squibb Company (NYSE:BMY) declared a consistent quarterly dividend of $0.57 per share on September 20. Shareholders of record as of October 6 received this dividend on November 1.
As of the conclusion of the third quarter this year, Bristol-Myers Squibb Company (NYSE:BMY) attracted investment from 65 out of the 910 hedge funds examined in Insider Monkey’s research.
RGA Investment Advisors made the following comment about Bristol-Myers Squibb Company (NYSE:BMY) in its Q3 2022 investor letter:
“Bristol-Myers Squibb Company (NYSE:BMY), which we referenced above, boasts a double digit free cash flow yield that gets divided roughly equally between repurchases, a dividend and M&A in what is the best environment for acquisitions perhaps ever. In 2019, BMY acquired Celgene, who had one of the better corporate development programs in the industry. We view this as a great outlet for us as generalists considering a company like BMY should truly thrive with the ability to acquire outstanding assets and science at depressed valuations. We touched on the Turning Point acquisition above and we expect the company to be increasingly active in the M&A landscape. Importantly, Celgene also came to BMY with a phenomenal CAR-T platform. CAR-T is a cell therapy that activates the body’s immune system to target cancers. This will be a key growth vector alongside M&A in overcoming the company’s patent cliff.”
7. Abbott Laboratories (NYSE:ABT)
Number of Hedge Fund Holders: 69
Headquartered in Abbott Park, Illinois, United States, Abbott Laboratories (NYSE:ABT) is a multinational medical devices and healthcare company with a diverse product portfolio that includes Pedialyte, Similac, BinaxNOW, Ensure, Glucerna, ZonePerfect, FreeStyle Libre, i-STAT, and MitraClip.
In the third quarter, Abbott Laboratories (NYSE:ABT) reported a 2.5% year-over-year (YoY) decline in revenues, totaling $10.14 billion, surpassing estimates by $320 million. Despite this decline, the company exceeded the anticipated earnings per share (EPS) of $1.10, posting a non-GAAP EPS of $1.14. Abbott Laboratories (NYSE:ABT) expects its full-year adjusted diluted EPS to range between $4.42 and $4.46 and anticipates low double-digit growth in organic sales for 2023, excluding COVID-19 testing-related sales.
As of Q3 2023, 69 of the 910 hedge funds tracked by Insider Monkey owned shares of Abbott Laboratories (NYSE:ABT). Among the leading hedge fund shareholders was Ric Dillon’s Diamond Hill Capital with ownership of 5.06 million shares valued at $490.45 million.
6. Pfizer Inc. (NYSE:PFE)
Number of Hedge Fund Holders: 73
Pfizer Inc. (NYSE:PFE) is a multinational pharmaceutical and biotechnology corporation based in the United States, with its headquarters situated at The Spiral in Manhattan, New York City. Founded in 1849 by German entrepreneurs Charles Pfizer and Charles F. Erhart, the company is globally recognized for its extensive research, development, and production of medicines and vaccines spanning various medical fields, including immunology, oncology, cardiology, endocrinology, and neurology. Notably, in 2022, Pfizer Inc. (NYSE: PFE) achieved significant success with its standout product, the COVID-19 vaccine Comirnaty, generating an impressive $37.8 billion in alliance revenues and direct sales.
Pfizer Inc. (NYSE:PFE) has received approval from the U.S. Food and Drug Administration (FDA) for its vaccine, known as Penbraya. This marks a groundbreaking achievement as the first vaccine capable of providing protection against five distinct categories of life-threatening bacteria responsible for conditions such as meningitis and blood poisoning. Presently, Pfizer Inc. (NYSE:PFE) offers two vaccines for the prevention of this disease.
As of the close of Q3 2023, data from Insider Monkey's database revealed that 73 hedge funds maintained stakes in Pfizer Inc. (NYSE:PFE), a figure unchanged from the previous quarter. The collective value of these stakes exceeds $2.4 billion.
Pfizer Inc. (NYSE:PFE), much like AbbVie Inc. (NYSE:ABBV), Eli Lilly and Company (NYSE:LLY), and Johnson & Johnson (NYSE:JNJ) as one of the best pharma stocks investors should keep on their radars.
Click to continue reading and see 5 Best Drug Stocks To Invest In.
Suggested Articles:
Disclaimer. None. 15 Best Drug Stocks To Invest In is originally published on Insider Monkey.
