In this article, we will take a look at the 10 best healthcare stocks for recession.
The healthcare sector in 2022 outperformed the market despite several headwinds and a negative macroeconomic backdrop. Data shows that the Health Care Select Sector SPDR exchange-traded fund (XLV) fell just 3.5% in the year, compared to a whopping 20% drop for SPY. The overall sector was lifted by several positive news from major and small healthcare and biotech companies in terms of their pipelines. The healthcare sector also consists of many established players which have been paying consistent dividends to their shareholders.
The healthcare sector was one of the biggest losers during the onset of the coronavirus pandemic. But 2022 saw major companies in the sector regain their footing as patients came back to doctors’ offices to make up for the skipped checkups during the pandemic days. According to a November 2022 report from WSJ, the pandemic has led to about $150 billion in sales from new Covid-19 products, including diagnostics, vaccines and therapeutics. The report also quoted UnitedHealth Group’s CFO, who said in a conference call that the company was “encouraged” to see people actively obtaining preventive screenings.
Major healthcare stocks that gained value in 2022 and are also set for strong performance this year include McKesson Corp., Cardinal Health and Cigna. You will see these stocks in our list, along with several other players which are strong stock picks for recessions.
Healthcare stocks tend to remain steady when others are wavering because these companies can often pass on higher costs to customers during inflation. The healthcare sector is also receiving positive outlook from major analyst firms in the Wall Street. For example, in December, investment firm Citi gave an Overweight rating to the sector and said:
“While tempted to downgrade into this past year’s relative outperformance, the decision is stick with the sector’s defensive connotation.”
Our Methodology
For this article, we used the Finviz stock screener to find large-cap healthcare companies which posted positive stock performance (at least 20% gain) in 2022. For each stock we have mentioned its growth catalysts and why is it a good stock pick for recessions. The list is ranked in ascending order of the number of hedge funds having stakes in them. We used Insider Monkey’s database of 920 funds to gauge that metric for each company.
10 Best Healthcare Stocks For Recession
10. Neurocrine Biosciences, Inc. (NASDAQ:NBIX)
Number of Hedge Fund Holders: 44
One of the best performers in the healthcare sector in 2022 was California-based Neurocrine Biosciences, Inc. (NASDAQ:NBIX). Neurocrine Biosciences, Inc. (NASDAQ:NBIX) makes treatments for neurological diseases. Neurocrine Biosciences, Inc. (NASDAQ:NBIX) was up about 40% last year. Last month, Neurocrine Biosciences (NASDAQ:NBIX) announced that the FDA had accepted its supplemental new drug application (sNDA) for valbenazine for the treatment of movement disorder associated with Huntington’s disease. Neurocrine Biosciences, Inc. (NASDAQ:NBIX) said that the authority will decide about the sNDA by Aug. 20, 2023. Neurocrine Biosciences, Inc. (NASDAQ:NBIX) jumped in November 2022 after Neurocrine Biosciences, Inc. (NASDAQ:NBIX) posted Q3 results and upped its FY’22 guidance for its drug Ingrezza, which is used to treat Tardive dyskinesia (TD). Revenue of Neurocrine Biosciences, Inc. (NASDAQ:NBIX) in the third quarter came in at $387.9 million, beating estimates. Net product sales in the period also jumped about 31% to total $379.3 million.
Hedge funds are piling into Neurocrine Biosciences, Inc. (NASDAQ:NBIX). As of the end of the third quarter, 44 funds in Insider Monkey’s database had reported stakes in Neurocrine Biosciences, Inc. (NASDAQ:NBIX), compared to 39 funds in the previous quarter. The total value of these stakes was about $1.3 billion.
9. Cardinal Health, Inc. (NYSE:CAH)
Number of Hedge Fund Holders: 45
Cardinal Health, Inc. (NYSE:CAH) is one of the best healthcare stock picks for recessions. Cardinal Health, Inc. (NYSE:CAH) is a dividend aristocrat, having increased its dividend for over 25 years without a break. Cardinal Health, Inc. (NYSE:CAH) gained about 49% in 2022. In November, Bank of America upgraded Cardinal Health, Inc. (NYSE:CAH) to Neutral from Underperform, citing the performance of Cardinal Health, Inc. (NYSE:CAH)’s pharmaceutical segment. The upgrade came after Cardinal Health, Inc. (NYSE:CAH) posted strong results for its Q1 FY23.
A team of analysts at BofA led by Michael Cherny said they expect Cardinal Health, Inc. (NYSE:CAH)’s core pharma distribution market to benefit from stable volumes and potential near-term upside from the flu season.
As of the end of the third quarter, 45 hedge funds tracked by Insider Monkey reported having stakes in Cardinal Health, Inc. (NYSE:CAH), compared to 44 funds in the previous quarter. The biggest stakeholder of Cardinal Health, Inc. (NYSE:CAH) was Richard S. Pzena’s Pzena Investment Management, which had a $182 million stake in Cardinal Health, Inc. (NYSE:CAH).
Ariel Investment made the following comment about Cardinal Health, Inc. (NYSE:CAH) in its Q3 2022 investor letter:
“Additionally, distributor of pharmaceutical and medical products Cardinal Health, Inc. (NYSE:CAH) advanced in the period as leadership changes were viewed to be a positive for shares. Management provided a new profit outlook for Fiscal 2023 and announced an improvement plan for the medical segment. We are encouraged by these changes and think CAH’s underlying fundamentals and competitive advantages around preventative maintenance screenings and medication management will continue to improve. We believe valuations of health care companies like CAH that focus on cost optimization and promote technological efficiency across the supply chain will be rewarded over the long term.”
8. AmerisourceBergen Corporation (NYSE:ABC)
Number of Hedge Fund Holders: 47
AmerisourceBergen Corporation (NYSE:ABC) is a strong healthcare stock whose valuation looks depressed. For the fourth quarter, AmerisourceBergen Corporation (NYSE:ABC)’s adjusted EPS came in at $2.60, beating estimates by $0.02. Revenue in the quarter increased 3.8% on a YoY basis to total $61.17 billion, beating estimates by $610 million. For 2023, AmerisourceBergen Corporation (NYSE:ABC) said its revenue was expected to grow between 6% to 8% on a constant currency basis.
AmerisourceBergen Corporation (NYSE:ABC) is also a dividend payer. Back in November, it announced a dividend of $0.485/share, which was a 5.4% increase from prior dividend of $0.460. Forward dividend yield at the time came in at 1.2%.
AmerisourceBergen Corporation (NYSE:ABC) also saw an increased interest from the smart money during the third quarter. Of the 920 funds tracked by Insider Monkey, 47 had stakes in AmerisourceBergen Corporation (NYSE:ABC). The total value of these stakes was $604 million.
7. United Therapeutics Corporation (NASDAQ:UTHR)
Number of Hedge Fund Holders: 47
United Therapeutics Corporation (NASDAQ:UTHR) is one of the best healthcare stock picks for recessions. The Maryland-based company is known for lung disease treatments. United Therapeutics (NASDAQ:UTHR) stock soared 12% after the company’s Q3 results surpassed analysts’ estimates. During the third quarter, United Therapeutics Corporation (NASDAQ:UTHR)’s GAAP EPS jumped 43.57% Y/Y to $4.91. Total revenue in the period increased by 16% to reach $516 million.
As of the end of the third quarter, 47 hedge funds tracked by Insider Monkey reported having stakes in United Therapeutics Corporation (NASDAQ:UTHR). The total value of these stakes was $2.5 billion.
6. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX)
Number of Hedge Fund Holders: 49
Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is a Massachusetts-based biotech company. In December, Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) received go-ahead from the FDA for its IND application for VX-522, an mRNA candidate for cystic fibrosis. The treatment is intended for about 5,000 patients who do not benefit from a cystic fibrosis transmembrane conductance regulator (CFTR) modulator. Earlier this month, Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) and Arbor Biotechnologies extended their partnership according to which Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) will get rights to Arbor’s novel precision editing technology for up to three diseases.
As of the end of the third quarter, 49 hedge funds tracked by Insider Monkey reported having stakes in Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX). The total value of these stakes was $1.9 billion. The biggest stakeholder of Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) among these funds was Jim Simons’ Renaissance Technologies which has a $619 million stake in Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX). The second biggest stakeholder of Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) according to our database was Ian Simm’s Impax Asset Management, with a $202 million stake.
Artisan Partners made the following comment about Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) in its Q3 2022 investor letter:
“Biotechnology company Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) dominates the market for treatment of cystic fibrosis (CF) with limited competition. In addition to solid growth in CF revenues that has driven better-than-expected results, positive progress in its development pipeline has lifted shares. At the time of our Q2 2021 purchase, the stock was under pressure due to regulatory hurdles and Vertex’s decision not to pursue late-stage development of VX-864 after an unexpectedly unfavorable outcome. VX-864 is designed to treat alpha-1 antitrypsin deficiency (AATD), which is an inherited disorder with a strong correlation to pediatric liver disease. Irrespective of Vertex’s AATD pipeline, the company has nearly two decades of patent protection remaining for its CF franchise. Management maintains a healthy reserve of cash and is focusing on research and development. We believe near-term growth is likely to be driven by Vertex’s expanding geographic presence and expansion of medicines to lower age groups, with long-term gains arising from the company’s diversifying pipeline.”
5. McKesson Corporation (NYSE:MCK)
Number of Hedge Fund Holders: 51
McKesson Corporation (NYSE:MCK) is one of the most notable healthcare companies in the US. McKesson Corporation (NYSE:MCK) has gained about 51% over the past year, as of January 18.
McKesson Corporation (NYSE:MCK) is a hedge fund favorite. As of the end of the third quarter, 51 hedge funds tracked by Insider Monkey had stakes in McKesson Corporation (NYSE:MCK), compared to 47 funds in the previous quarter. The total value of these stakes was $4.1 billion. The biggest stakeholder of McKesson Corporation (NYSE:MCK) as of the end of September was legendary investor and billionaire Warren Buffett’s Berkshire Hathaway, which had a $1.1 billion stake in McKesson Corporation (NYSE:MCK).
4. Sarepta Therapeutics, Inc. (NASDAQ:SRPT)
Number of Hedge Fund Holders: 52
Sarepta Therapeutics, Inc. (NASDAQ:SRPT) is a biotech company. Sarepta Therapeutics, Inc. (NASDAQ:SRPT) gained about 100% in value in 2022. The future outlook of Sarepta Therapeutics, Inc. (NASDAQ:SRPT) is also strong, which makes it one of the best healthcare stocks for recession. Earlier this month Sarepta Therapeutics, Inc. (NASDAQ:SRPT) announced that its net product revenue in Q4 was expected to come in at about $235.5 million, which would be about 32% more than the revenue posted in the comparable period last year. Sarepta Therapeutics, Inc. (NASDAQ:SRPT) said this revenue growth was driven by its three RNA-based PMO therapies. In November, FDA accepted Sarepta Therapeutics, Inc. (NASDAQ:SRPT)’s marketing application for gene therapy candidate SRP-9001. Sarepta Therapeutics, Inc. (NASDAQ:SRPT) makes this treatment with Roche.
Hedge fund sentiment for Sarepta Therapeutics, Inc. (NASDAQ:SRPT) spiked in the third quarter of 2022. Of the 920 funds tracked by Insider Monkey, 52 funds reported having stakes in Sarepta Therapeutics, Inc. (NASDAQ:SRPT) at the end of the third quarter, compared to 41 funds in the previous quarter.
3. Biogen Inc. (NASDAQ:BIIB)
Number of Hedge Fund Holders: 70
Biogen Inc. (NASDAQ:BIIB) is one of the notable healthcare stocks that might be a strong pick for recessions since Biogen Inc. (NASDAQ:BIIB) has growth potential and several catalysts that can boost its value. Biogen Inc. (NASDAQ:BIIB) is currently in the news after the FDA earlier this month granted accelerated approval to Biogen (NASDAQ:BIIB) and Eisai’s (OTCPK:ESALY) drug that is made for the treatment of Alzheimer’s disease.
The drug, named Leqembi (lecanemab), is expected to be available later this month and its wholesale cost will be about $26,500 per year based on twice monthly infusions. However, analysts are in a wait-and-see mode regarding the drug since Biogen Inc. (NASDAQ:BIIB) has a history of getting approval for a similar treatment in the past which failed to show strong results.
Hedge funds are buying stakes in Biogen Inc. (NASDAQ:BIIB). As of the end of the third quarter, 70 hedge funds reported having stakes in Biogen Inc. (NASDAQ:BIIB), compared to 54 funds in the previous quarter. The biggest stakeholder of Biogen Inc. (NASDAQ:BIIB) during this period was Steve Cohen’s Point72 Asset Management $448 million.
ClearBridge Investments made the following comment about Biogen Inc. (NASDAQ:BIIB) in its Q3 2022 investor letter:
“Biogen Inc. (NASDAQ:BIIB) was the leading contributor among several biopharma names, boosted by positive, pivotal clinical data for its next-generation Alzheimer’s treatment Lecanemab. In a pivotal trial, the drug proved safe and efficacious in slowing progression of Alzheimer’s disease.”
2. Cigna Corporation (NYSE:CI)
Number of Hedge Fund Holders: 76
Cigna Corporation (NYSE:CI) outperformed the market in 2022. On a TTM basis Cigna Corporation (NYSE:CI)’s revenue stands at about $190 billion. Cigna Corporation (NYSE:CI)’s cash position also remains strong. It has about $7 billion in cash as of the end of 2022, which shows a 40% jump as compared to 2021. Cigna Corporation (NYSE:CI)’s debt position also shows that there is no short-term risk to the company. Cigna Corporation (NYSE:CI) has about $9 billion in free cash flow as of the last 12 months. Cigna Corporation (NYSE:CI)’s short-term debt stands at $3.4 billion and its long-term debt is $28 billion. Cigna Corporation (NYSE:CI) is also a dividend stock with a dividend yield of about 1.42% as of January 17.
Hedge fund sentiment is also strong for Cigna Corporation (NYSE:CI). It has 76 hedge funds with stakes in it as of the end of the third quarter, compared to 66 funds in the previous quarter.
Aristotle Atlantic made the following comment about Cigna Corporation (NYSE:CI) in its Q3 2022 investor letter:
“Cigna Corporation (NYSE:CI) outperformed the S&P 500 Index in the third quarter, as the company reported what we view as solid second quarter results driven by a better-than-expected medical loss ratio. The company continues to be aggressive with share repurchases and we believe the defensive nature of Cigna’s business continues to be attractive during the ongoing macroeconomic uncertainty.”
1. Humana Inc. (NYSE:HUM)
Number of Hedge Fund Holders: 76
Humana Inc. (NYSE:HUM) is one of the biggest health insurance companies in the US. In December, Humana Inc. (NYSE:HUM) was a awarded a potential contract worth a whopping $70.85 billion to provide managed care support to the Department of Defense, Defense Health Agency, TRICARE program in the East Region. Humana Inc. (NYSE:HUM) will help the Defense Health Agency in operating an integrated health care delivery system to provide health, medical and administrative support services to the members of the uniformed services, retirees and their eligible family members. In November, Humana Inc. (NYSE:HUM) shares made headlines after the company announced plans to buy back about $1 billion worth of its shares under accelerated share repurchase agreements with Goldman Sachs and Mizuho as part of a $3 billion stock repurchase program announced in February 2022.
At the end of the September quarter, 76 hedge funds of the 920 funds in Insider Monkey database reported having stakes in Humana Inc. (NYSE:HUM). The collective value of these stakes was $4.3 billion.
Renaissance Investment made the following comment about Humana Inc. (NYSE:HUM) in its Q3 2022 investor letter:
“In September, We added a new position in the Health Care sector with Humana Inc. (NYSE:HUM), one of the largest managed care providers in the U.S. with a focus on medical insurance for the Medicare Advantage market. We believe Humana is poised to see a reacceleration in Medicare Advantage membership growth after making large investments in its program benefits earlier this year. In addition, we like the demographic tailwinds for the entire Medicare Advantage market, as the next four years should provide the highest number of baby boomers yet qualifying for Medicare benefits.”
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Disclosure: None. 10 Best Healthcare Stocks For Recession is originally published on Insider Monkey.
