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Hedge Funds Open Kimono: 5 Best Healthcare Stocks To Buy

Insider Monkey Staff

We believe one of the best tools for ordinary investors who are on the hunt for new ideas is 13F filings. Once every quarter hedge funds with at least $100 million in total positions in publicly traded US stocks/options are required to open the kimono and disclose the number of shares and the total value of its positions in each of the stocks and options in its portfolio. On Thursday, around 600 hedge funds which waited till the last minutes of the filing deadline disclosed their US equity holdings as of September 30th. Another 150 hedge funds disclosed their positions a few days earlier.

Hedge funds hire some of the smartest Ivy League graduates as their analysts, have access to industry insiders whom they "consult" with, unconventional data sources that cost tens of thousands of dollars, years of experience and millions of dollars as incentives to come up with the next great investment idea. Every quarter we process around 750 hedge funds' 13F filings to identify each hedge fund's new moves, top stock picks, and more importantly overall sentiment changes towards each of the 4000 stocks that are publicly trading. We publish all of our analysis in our premium quarterly newsletter (download a free sample), and then share interesting bits and pieces on our website.

Yesterday we published the list of 30 most popular stocks among hedge funds. This list's top 20 stock picks have been performing much better than the market indices that you see on your financial news websites and channels. In 2019 the top 20 most popular hedge fund stocks returned nearly 34% and outperformed the S&P 500 Index by more than 8 percentage points. If you have $500,000 invested in an index fund that tracks the market, you left $40,000 on the table this year by not imitating hedge funds' top 20 stock picks.

This weekend we listed the 5 mega-cap stocks that hedge funds are crazy about (stocks with at least $100 billion in market capitalization), 5 very large-cap stocks hedge funds are buying (market caps between $60 billion and 100 billion), and 5 large-cap stocks hedge funds are piling into (market caps between $20 billion and $60 billion). We also listed the top 5 financial stocks among hedge funds. Hedge funds have been very bullish about these stocks for a very long time and these stocks rewarded their investors in return. In this article we will focus on the top 5 healthcare stocks hedge funds are piling into. Recently Amazon.com Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL) made forays into healthcare with some of their initiatives, but these aren't significant for the time being which is why we excluded these three stocks from this list.

Later this weekend we will publish similar rankings for mid-cap stocks, small-cap stocks, and micro-cap stocks. We will also publish similar rankings for top IPO stocks among hedge funds, top biotech stocks, and top dividend stocks.

Below is our video about the 5 most popular stocks among hedge funds. The list of top 5 stocks hasn't changed since the end of March. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Here is our list of the 5 best healthcare stocks to buy according to hedge funds:

28. Merck & Company, Inc. (NYSE:MRK): $85 Number of Hedge Funds: 73 Total Dollar Amount of Long Hedge Fund Positions:$4.6 billion Percent of Hedge Funds with Long Positions: 9.8% Fourth Quarter Return (through Aug 30th): 0.4% Popularity Ranking (Q2): 30 Noteworthy Hedge Fund Shareholders: Cliff Asness, Peter Rathjens, Bruce Clarke and John Campbell

[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]

AQR CAPITAL MANAGEMENT

27. Johnson&Johnson (NYSE:JNJ): $135 Number of Hedge Funds: 76 Total Dollar Amount of Long Hedge Fund Positions:$7.3 billion Percent of Hedge Funds with Long Positions: 10.2% Fourth Quarter Return (through November 14th): 1.2% Popularity Ranking (Q2): 42 Noteworthy Hedge Fund Shareholders: Quant hedge funds AQR, DE Shaw, Renaissance, and Two Sigma [caption id="attachment_364467" align="aligncenter" width="750"] Niloo / Shutterstock.com[/caption]

Johnson & Johnson JNJ headache tylenol pain acetaminophen pill relief display health

25. UnitedHealth Group (NASDAQ:UNH): $269 Number of Hedge Funds: 78 Total Dollar Amount of Long Hedge Fund Positions:$5.6 billion Percent of Hedge Funds with Long Positions: 10.4% Fourth Quarter Return (through November 14th): 17.7% Noteworthy Hedge Fund Shareholders: Stephen Mandel, Boykin Curry [caption id="attachment_527398" align="aligncenter" width="750"] Ken Wolter/Shutterstock.com[/caption]

Ken Wolter/Shutterstock.com

22. Allergan plc. (NYSE:AGN): $183.60 Number of Hedge Funds: 82 Total Dollar Amount of Long Hedge Fund Positions:$8.2 billion Percent of Hedge Funds with Long Positions: 11.0% Fourth Quarter Return (through November 14th): 8.9% Popularity Ranking (Q2): 22 Noteworthy Hedge Fund Shareholders: Dan Loeb, John Paulson

largest hedge funds in the world

15. Celgene Corporation (NASDAQ:CELG): $110 Number of Hedge Funds: 93 Total Dollar Amount of Long Hedge Fund Positions:$12.5 billion Percent of Hedge Funds with Long Positions: 12.4% Fourth Quarter Return (through November 14th): 10.8% Popularity Ranking (Q2): 17 Noteworthy Hedge Fund Shareholders: Phill Gross and Robert Atchinson, William B. Gray

Phill Gross, Adage Capital Management

Disclosure: None. This article is originally published at Insider Monkey.