In this article, we discuss the 10 best big pharma stocks to buy now.
On September 9, the United States Department of Health and Human Services (HHS) unveiled a comprehensive plan to reduce drug prices. Since then, major pharmaceutical stocks have slipped including Johnson & Johnson (NYSE:JNJ), AbbVie Inc. (NYSE:ABBV), Pfizer Inc. (NYSE:PFE), and Eli Lilly and Company (NYSE:LLY).
However, despite the temporary volatility, the pharmaceutical industry is set to grow amid several factors mentioned below.
Growth Catalysts for Pharma Stocks
According to a recent market outlook report, the global pharmaceutical market is anticipated to reach $1.25 trillion in 2021, at a compound annual growth rate (CAGR) of 1.8%, up from $1.23 trillion in the previous year. By 2025, the global pharmaceutical market is projected to grow at a CAGR of 8% to $1.7 trillion. One of the drivers for the steady growth in the pharmaceutical market is the presence and ongoing development of COVID-19 vaccines and boosters. Vaccine manufacturers such as Moderna, Inc. (NASDAQ:MRNA), AstraZeneca PLC (NASDAQ:AZN), Pfizer Inc. (NYSE:PFE), and Johnson & Johnson (NYSE:JNJ) are among the pharmaceutical companies that posted strong sales driven by COVID-19 revenues in the previous quarters.
The rise of personalized medicine, also known as precision medicine, is one of the factors driving growth in the pharmaceutical sector. Some of the big pharma companies that are maximizing R&D resources in developing personalized medications include Pfizer Inc. (NYSE:PFE) and AstraZeneca PLC (NASDAQ:AZN). Year to date, the stocks have gained 20.08% and 17.02%, respectively.
Another factor boosting the pharmaceutical industry’s growth is the increasing demand for prescription pharmaceuticals due to the aging population. According to a recent report from the American Association of Retired Persons (AARP), the cost of 260 regularly prescribed medications climbed by 2.9 %, while the overall rate of inflation was 1.3% in 2020.
Image by Steve Buissinne from Pixabay
Our Methodology
With this context in mind, here is our list of the 10 best big pharma stocks to buy now. The list is compiled according to the number of hedge fund holders in each company. Data from the 873 funds tracked by Insider Monkey was used for this purpose.
We also considered the fundamentals and prospects for the growth of these stocks based on key business characteristics. We also looked at analyst ratings to give potential investors more information so they could make better investment decisions.
Why should we pay attention to hedge fund sentiment while choosing stocks? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let’s now look at the 10 best big pharma stocks to buy now.
Best Big Pharma Stocks to Buy Now
10. Moderna, Inc. (NASDAQ:MRNA)
Number of Hedge Fund Holders: 37
We start our list of the 10 best big pharma stocks to buy now with pharmaceutical and biotechnology firm Moderna, Inc. (NASDAQ:MRNA). The Massachusetts-based company develops vaccines and therapeutics. Moderna, Inc. (NASDAQ:MRNA) is one of the major pharmaceutical firms awaiting FDA approval for its COVID-19 vaccine and booster.
On August 3, Moderna, Inc. (NASDAQ:MRNA) received a Fast Track designation from the FDA for its respiratory syncytial virus (RSV) vaccine candidate, mRNA-1345.
On September 16, BofA analyst Geoff Meacham maintained his Underperform rating on Moderna, Inc. (NASDAQ:MRNA) with a price target of $115 per share. According to the analyst, the company’s consensus revenue estimates for 2021 and 2022 already reflect booster provision. In its second-quarter earnings report, the company announced the signing of a $20 billion Advanced Purchase Agreements (APAs) for expected product sales of $20 billion in FY2021. For FY2022, Moderna, Inc. (NASDAQ:MRNA) has secured APAs for approximately $12 billion in product sales and $8 billion in options.
In the second quarter of 2021, Moderna, Inc. (NASDAQ:MRNA) reported an EPS of $6.46, beating estimates by $0.60. The company’s second-quarter revenue came in at $4.4 billion, up from $67 million in the same quarter in 2020, and beat revenue estimates by $120.59 million.
At the end of the second quarter of 2021, 37 hedge funds in the database of Insider Monkey held stakes worth $5.75 billion in Moderna, Inc. (NASDAQ:MRNA).
Carillon Tower Advisers mentioned Moderna, Inc. (NASDAQ:MRNA in its Q2 2021 investor letter:
“Moderna is a biotechnology company pioneering messenger RNA (mRNA) therapeutics and vaccines. The stock outperformed in the quarter, as the firm’s COVID-19 vaccine has shown effectiveness against the emerging variants of the disease, specifically the now prevalent Delta variant. The potential need for additional booster shots of the vaccine to maintain longer-term immunity as well as protection against possible future variants is also contributing to the stock’s move higher.”
9. AstraZeneca PLC (NASDAQ:AZN)
Number of Hedge Fund Holders: 37
AstraZeneca PLC (NASDAQ:AZN) is a drug manufacturer based in the United Kingdom and it ranks ninth on the list of 10 best big pharma stocks to buy now. The pharmaceutical company manufactures and sells prescription medicines to treat infection, cardiovascular, oncology, and renal diseases.
On September 18, AstraZeneca PLC (NASDAQ:AZN) released positive findings from its Enhertu study, which demonstrated a 72% reduction in the risk of tumor progression or mortality in women with metastatic breast cancer. Following positive clinical data, shares of AstraZeneca PLC (NASDAQ:AZN) jumped 5.29% on September 20.
On September 17, Morgan Stanley analyst Mark Purcell maintained an Overweight rating on AstraZeneca PLC (NASDAQ:AZN) and increased his price target for the stock to 10,000 GBp from 9,800 GBp.
In the second quarter of 2021, AstraZeneca PLC (NASDAQ:AZN) reported an EPS of $0.45, missing estimates by -$0.24. The company’s revenue in the second quarter came in at $8.22 billion, beating revenue estimates by $768.98 million. The company’s revenue in the oncology and biopharmaceutical segments increased by 19% and 25%, respectively, in the second quarter, accounting for 41% and 35% of total revenue.
At the end of the second quarter of 2021, 37 hedge funds in the database of Insider Monkey held stakes worth $2.77 billion in AstraZeneca PLC (NASDAQ:AZN), up from 34 in the previous quarter worth $2.66 billion.
8. Amgen Inc. (NASDAQ:AMGN)
Number of Hedge Fund Holders: 53
Amgen Inc. (NASDAQ:AMGN) is a drug manufacturer based in California that ranks eighth on the list of 10 best big pharma stocks to buy now. The company manufactures and sells medications to treat psoriasis, arthritis, osteoporosis, anemia, and cancer.
This year, Amgen Inc. (NASDAQ:AMGN) has been on an acquisition binge. In April, the drugmaker acquired Five Prime Therapeutics (NASDAQ:FPRX), a clinical-stage biotechnology company focused on developing immuno-oncology treatments, for $1.9 billion. In July, Amgen Inc. (NASDAQ:AMGN) recently announced the acquisition of TeneoBio, Inc., a privately-held clinical-stage biotechnology company developing Human Heavy-Chain Antibodies, for $900 million.
On September 7, Morgan Stanley analyst Matthew Harrison gave Amgen Inc. (NASDAQ:AMGN) an Equal-weight rating with a price target of $251 per share.
In the second quarter of 2021, Amgen Inc. (NASDAQ:AMGN) reported an EPS of $4.38, beating estimates by $0.37. The company’s revenue in the second quarter came in at $6.5 billion, an increase of 5% year over year, and beat revenue estimates by $75 million.
At the end of the second quarter of 2021, 53 hedge funds in the database of Insider Monkey held stakes worth $1.65 billion in Amgen Inc. (NASDAQ:AMGN), up from 47 in the previous quarter worth $1.00 billion.
Along with Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), AbbVie Inc. (NYSE:ABBV), and AstraZeneca PLC (NASDAQ:AZN), Amgen Inc. (NASDAQ:AMGN) is one of the biggest pharmaceutical stocks to invest in right now.
Distillate Capital mentioned Amgen Inc. (NASDAQ:AMGN) in its Q4 2020 investor letter:
“One of the biggest additions to the portfolio in the rebalance was Amgen Inc. The company underperformed the S&P 500 Index last quarter even though its free cash flow estimates increased. Because the portfolio’s weighting methodology is linked to free cash flow, position sizes increased to reflect improving fundamentals relative to prices, and the more attractive valuations that result.”
7. Gilead Sciences, Inc. (NASDAQ:GILD)
Number of Hedge Fund Holders: 54
Gilead Sciences, Inc. (NASDAQ:GILD) is a research-based biopharmaceutical company based in California that ranks seventh on the list of 10 best big pharma stocks to buy now. Gilead Sciences, Inc. (NASDAQ:GILD) manufactures and sells HIV and cancer medications internationally. The company also developed Veklury, an intravenous antiviral injection used to treat COVID-19.
On July 30, BMO Capital analyst Matthew Luchini maintained a Market Perform rating on Gilead Sciences, Inc. (NASDAQ:GILD) and increased his price target for the stock to $72 from $67, citing the company’s solid Q2 earnings performance driven by Veklury sales, which contributed $829 million to total sales.
In the second quarter of 2021, Gilead Sciences, Inc. (NASDAQ:GILD) reported an EPS of $1.87, beating estimates by $0.12. The company’s second-quarter revenue came in at $6.22 billion, an increase of 21% year over year, and beat revenue estimates by $133.06 million.
At the end of the second quarter of 2021, 54 hedge funds in the database of Insider Monkey held stakes worth $1.73 billion in Gilead Sciences, Inc. (NASDAQ:GILD).
Gilead Sciences, Inc. (NASDAQ:GILD), Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), AbbVie Inc. (NYSE:ABBV), and AstraZeneca PLC (NASDAQ:AZN) are some of the cheap big pharma stocks that investors have their eye on.
Out of the hedge funds being tracked by Insider Monkey, New York-based hedge fund firm Renaissance Technologies is a leading shareholder in Gilead Sciences, Inc. (NASDAQ:GILD), with 5,047,355 shares worth more than $347 million.
6. Abbott Laboratories (NYSE:ABT)
Number of Hedge Fund Holders: 61
Medical device and pharmaceutical company Abbott Laboratories (NYSE:ABT) ranks sixth on the list of 10 best big pharma stocks to buy now. The company’s pharmaceutical segment sells generic drugs for the treatment of various diseases including irritable bowel syndrome, hypertension, migraine, vertigo, and hypothyroidism. Also, Abbott Laboratories (NYSE:ABT) is known as a global medical device leader. The company manufactures medical devices to treat cardiovascular diseases and movement disorders.
On August 31, BTIG analyst Marie Thibault maintained a Buy rating on Abbott Laboratories (NYSE:ABT) and increased her price target for the stock to $136 from $126, highlighting the company’s FDA-approved medical device, Amulet Left Atrial Appendage Occluder, which treats atrial fibrillation in stroke patients.
In the second quarter of 2021, Abbott Laboratories (NYSE:ABT) reported an EPS of $1.17, beating estimates by 0.15. The company’s revenue in the second quarter came in at $10.22 billion, up 39.5% year over year, and beat revenue estimates by $550.34 million.
At the end of the second quarter of 2021, 61 hedge funds in the database of Insider Monkey held stakes worth $4.36 billion in Abbott Laboratories (NYSE:ABT).
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Abbott Laboratories (NYSE:ABT) with 8.1 million shares worth more than $939 million.
Polen Capital mentioned Abbott Laboratories (NYSE:ABT) in its Q2 2021 investor letter:
“Abbott Laboratories was the lone detractor in the quarter as the company preannounced that revenue and earnings this year would be below their previous guidance. We still expect the company to grow earnings more than 20% this year and continue double-digit earnings growth in the years to come. However, weakness in COVID-19 testing revenue is primarily responsible for the guidance reduction. Abbott is a leader in multiple types of COVID-19 diagnostic tests, and the largely successful vaccine rollout globally is leading to less COVID testing than the company expected. Two years ago, these tests obviously accounted for $0 in revenue but recently accounted for nearly $10 billion in annualized revenues as of the fourth quarter of 2020. We have expected COVID testing revenues to decline sequentially every quarter and eventually level out at less than $1 billion per year. We are not surprised by the current reality, but the decline has been more rapid than what management had expected.
Abbott is a diversified medical products company with likely strong growth to come from its core businesses outside of COVID testing— our investment thesis was not dependent on pandemic related revenue. While the reduction in guidance is atypical for Abbott’s conversative management team, we do not believe it changes our long-term growth assumptions or the investment case in Abbott.”
5. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Holders: 64
Eli Lilly and Company (NYSE:LLY) is an Indiana-based drug manufacturer and it ranks fifth on the list of 10 best big pharma stocks to buy now. The company manufactures and sells drugs to treat diabetes, cancer, rheumatoid arthritis, psoriatic arthritis, fibromyalgia, bipolar disorder, depressive symptoms, and migraine.
On August 30, Cowen analyst Steve Scala maintained an Outperform rating on Eli Lilly and Company (NYSE:LLY) and increased his price target for the stock to $300 from $250.
Eli Lilly and Company (NYSE:LLY) announced on September 21 that it has reached an agreement with the European Commission to distribute 220,000 doses of the COVID-19 medicines Bamlanivimab and Etesevimab in the European Union (EU) and European Economic Area (EEA).
The company’s second-quarter revenue came in at $6.74 billion, up 23% year over year, and beat revenue estimates by $150.73 million. The drugmaker recorded a 22% volume increase in the quarter.
At the end of the second quarter of 2021, 64 hedge funds in the database of Insider Monkey held stakes worth $2.99 billion in Eli Lilly and Company (NYSE:LLY), up from 55 in the previous quarter worth $2.55 billion.
Out of the hedge funds being tracked by Insider Monkey, Washington-based hedge fund firm Fisher Asset Management is a leading shareholder in Eli Lilly and Company (NYSE:LLY) with 6,010,313 shares worth more than $1.37 billion.
Baron Funds mentioned Eli Lilly and Company (NYSE:LLY) in its Q2 2021 investor letter:
“We started a position in Eli Lilly and Company, a large-cap pharmaceutical company. We think Lilly has a healthy base business with limited near-term patent expirations, a strong pipeline, and potential for significant margin expansion, which should translate to high single-digit revenue growth and mid-teens earnings growth over the next five years. Lilly’s pipeline includes donanemab, a potential blockbuster drug which the company is developing for Alzheimer’s disease and which recently received Breakthrough Therapy Designation by the FDA.”
4. Pfizer Inc. (NYSE:PFE)
Number of Hedge Fund Holders: 67
Biopharmaceutical giant Pfizer Inc. (NYSE:PFE) ranks fourth on the list of 10 best big pharma stocks to buy now. The New York-based drug manufacturer sells medications and vaccines internationally. On September 20, Pfizer Inc. (NYSE:PFE) announced additional favorable results from a clinical study of its COVID-19 vaccine in children aged 5 to 11 years old. The COVID-19 vaccine produced by Pfizer Inc. (NYSE:PFE) and BioNTech SE (NASDAQ:BNTX) appears to be safe and stimulate a strong immune response in children under the age of 12 years old, according to clinical study results.
On September 20, SVB Leerink analysts maintained a Market Perform rating on Pfizer Inc. (NYSE:PFE) with a price target of $50 per share.
In the second quarter of 2021, Pfizer Inc. (NYSE:PFE) reported an EPS of $1.07, beating estimates by $0.09. The company’s second-quarter revenue came in at $18.98 billion and beat revenue estimates by $249.96 million. The stock has gained 19%, year to date.
At the end of the second quarter of 2021, 67 hedge funds in the database of Insider Monkey held stakes worth $2.35 billion in Pfizer Inc. (NYSE:PFE), down from 65 in the previous quarter worth $2.01 billion.
Out of the hedge funds being tracked by Insider Monkey, Ohio-based hedge fund firm Diamond Hill Capital is a leading shareholder in Pfizer Inc. (NYSE:PFE) with 11,681,378 shares worth more than $457 million.
3. Bristol-Myers Squibb Company (NYSE:BMY)
Number of Hedge Fund Holders: 73
New York-based drugmaker Bristol-Myers Squibb Company (NYSE:BMY) ranks third on the list of 10 best big pharma stocks to buy now. The biopharmaceutical company offers a wide variety of therapeutic medications for cancer, psoriatic arthritis, hepatitis B, and blood disorders.
On July 26, Truist analyst Robyn Karnauskas gave Bristol-Myers Squibb Company (NYSE:BMY) a Buy rating and a price target of $74 per share.
In the second quarter of 2021, Bristol-Myers Squibb Company (NYSE:BMY) reported an EPS of $1.93, beating estimates by $0.03. The company’s second-quarter revenue came in at $11.79 billion, an increase of 16% year over year, and beat revenue estimates by $474.30 million.
At the end of the second quarter of 2021, 73 hedge funds in the database of Insider Monkey held stakes worth $5.20 billion in Bristol-Myers Squibb Company (NYSE:BMY), down from 81 in the previous quarter.
Out of the hedge funds being tracked by Insider Monkey, Massachusetts-based hedge fund firm Berkshire Hathaway is a leading shareholder in Bristol-Myers Squibb Company (NYSE:BMY) with 26,294,266 shares worth more than $1.75 billion.
2. AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders: 82
AbbVie Inc. (NYSE:ABBV) ranks second on the list of 10 best big pharma stocks to buy now. The Illinois-based pharmaceutical firm develops and sells medications for cancer, psoriasis, rheumatoid arthritis, Parkinson’s disease, and migraine.
On September 8, JPMorgan analyst Chris Schott maintained an Overweight rating on AbbVie Inc. (NYSE:ABBV) with a price target of $140 per share.
In the second quarter of 2021, AbbVie Inc. (NYSE:ABBV) reported an EPS of $3.11, beating estimates by $0.08. The company’s second-quarter revenue came in at $13.96 billion, up 33.9% year over year, and beat revenue estimates by $322.64 million. The stock has gained 23%, year to date.
At the end of the second quarter of 2021, 82 hedge funds in the database of Insider Monkey held stakes worth $5.35 billion in AbbVie Inc. (NYSE:ABBV), up from 72 in the previous quarter.
Out of the hedge funds being tracked by Insider Monkey, Massachusetts-based hedge fund firm Berkshire Hathaway is a leading shareholder in AbbVie Inc. (NYSE:ABBV) with 20,527,861 shares worth more than $2.31 billion.
1. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 88
Topping the list of 10 best big pharma stocks to buy now is American drug manufacturer Johnson & Johnson (NYSE:JNJ). The New Jersey-based drugmaker sells pharmaceuticals, consumer health products, and medical devices.
On September 7, Morgan Stanley analyst Matthew Harrison assigned an Equal-weight rating to Johnson & Johnson (NYSE:JNJ) and set a price target of $187 per share.
In the second quarter of 2021, Johnson & Johnson (NYSE:JNJ) reported an EPS of $2.48, beating estimates by $0.20. The company’s revenue in the second quarter came in at $23.31 billion, up 27.1%, and beat estimates by $802.29 million. The stock has gained 4%, year to date.
At the end of the second quarter of 2021, 88 hedge funds in the database of Insider Monkey held stakes worth $7.05 billion in Johnson & Johnson (NYSE:JNJ), up from 81 in the previous quarter worth $6.91 billion.
Out of the hedge funds being tracked by Insider Monkey, a London-based hedge fund firm, Fundsmith LLP is a leading shareholder in Johnson & Johnson (NYSE:JNJ) with 7,155,706 shares worth more than $1.17 billion.
Distillate Capital mentioned Johnson & Johnson (NYSE:JNJ) in its Q2 2021 investor letter:
“The largest additions in the rebalance, Johnson & Johnson was around 50 and 40 basis points incrementally. J&J underperformed in the quarter while its normalized free cash flows held steady and so its position size was topped off to match the stable cash flows.”
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Disclosure: None. 10 Best Big Pharma Stocks to Buy Now is originally published on Insider Monkey.
