In this article, we talk about the 5 best healthcare stocks to buy now according to Motley Fool’s 1623 Capital. If you wish to read our detailed analysis of 1623 Capital’s hedge fund performance and stock picks, go directly to 10 Best Healthcare Stocks To Buy Now According To Motley Fool’s 1623 Capital.
5. Penumbra, Inc. (NYSE:PEN)
1623 Capital’s Stake Value: $525,000
Percentage of 1623 Capital’s 13F portfolio: 0.26%
Number of Hedge Fund Holders: 29
Up next is Penumbra, Inc. (NYSE:PEN), a California-based company which deals in the development of devices for interventional therapies to treat vascular conditions such as aneurism and stroke.
Investors were seen piling into Penumbra, Inc. (NYSE:PEN). At the end of March, 29 hedge funds were long Penumbra, Inc. (NYSE:PEN), as compared to 23 hedge funds at the end of December. The total value of Q1 hedge fund holdings stood at nearly $410 million.
Penumbra, Inc. (NYSE:PEN) was given a ‘Buy’ rating by Citi analyst Joanne Wuensch on May 17 with a price target of $220. Deutsche Bank analyst Pito Chickering also gave the company a ‘Buy’ rating in April, and noted that it is well-positioned for “premium growth sustainably” in the coming years ahead. The analyst forecasts 15% annual sales growth through 2025, driven by the adoption of the firm’s mechanical thrombectomy aspiration catheters across multiple large patient populations with a low penetration and high unmet clinical need.
Ken Griffin’s Citadel Investment Group was the most prominent shareholder of Penumbra, Inc. (NYSE:PEN) in the first quarter, with a stake consisting of 367,000 shares priced at $81.6 million. Israel Englander’s Millennium Management was also bullish on the company with a $50 million stake.
Here is what ClearBridge Investments had to say about Penumbra, Inc. (NYSE:PEN) in its Q4 2021 investor letter:
“Our aversion toward early-stage biotech proved productive as did our approach of emphasizing the enablers and selected, profitable medical technology companies. Strong contributors during the fourth quarter included Penumbra, a developer of stents and related products to treat aneurysms that saw it shares recover from a product recall earlier in the year.”
4. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN)
1623 Capital’s Stake Value: $670,000
Percentage of 1623 Capital’s 13F portfolio: 0.33%
Number of Hedge Fund Holders: 56
1623 Capital, according to regulatory filings for the first quarter, held nearly 9,000 shares of BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) valued at $670,000. This represented 0.33% of the fund’s total holdings, and was an increase of 18% over the previous quarter.
Based in California, BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) makes drug therapies for patients with life-threatening and rare diseases. At the end of the first quarter, 56 hedge funds were bullish on the company shares with $2.36 billion in aggregate positions. This shows improving investor sentiment from the previous quarter where 48 hedge funds owned stakes in the company.
On July 12, Cantor Fitzgerald analyst Olivia Brayer initiated coverage of BMRN stock with an ‘Overweight’ rating and a $110 price target. She views BioMarin as one of the most differentiated stories in the biotech sector, and urges investors to capitalize on the shares at current levels. Brayer also stated that BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) boasts the best growth profile of any profitable biotech firm in the United States.
3. Teladoc Health, Inc (NYSE:TDOC)
1623 Capital’s Stake Value: $725,000
Percentage of 1623 Capital’s 13F portfolio: 0.36%
Number of Hedge Fund Holders: 36
Teladoc Health, Inc (NYSE:TDOC) offers virtual healthcare services in the United States. At the close of Q1 2022, 1623 Capital held more than 10,000 shares of the company valued at $725,000. This was a new addition to the fund’s portfolio, and represents 0.36% of its overall holdings.
On June 29, Stifel analyst David Grossman lowered the firm’s price target on Teladoc Health, Inc (NYSE:TDOC) to $36 from $45 and maintained a ‘Hold’ rating on the shares. He sees the company struggling with growing competition and market penetration, slowing growth and commoditization following the pandemic. The analyst sees little to no multiple expansion at current levels, given the broader economic outlook.
As of the end of the first quarter of 2022, 36 out of the 912 hedge funds tracked by Insider Monkey reported ownership of positions in Teladoc Health, Inc (NYSE:TDOC). This is down from 39 hedge funds a quarter earlier. ARK Investment Management of Cathie Wood stood as the firm’s most prominent Q1 shareholder, with a massive $1.4 billion stake.
Here is what Greenhaven Road Capital had to say about the market position and prospects of Teladoc Health, Inc. (NYSE:TDOC) in its Q1 2022 investor letter:
“Teladoc is the largest telehealth provider in the US and has recently begun to expand internationally. TDOC’s platform enables an ever-expanding list of patient-doctor interactions (including those for primary health care, mental health issues and chronic condition management) to transition from an on-site visit to one that can be done remotely with full video- based interaction. TDOC provides its platform of services on both a business-to-business and direct-to-consumer basis, through monthly subscription-based relationships. For its core business-to-business clients, the company contracts with a wide range of entities, including large scale employers (the company currently contracts with over 50% of the Fortune 500), health plans, health systems, and medical insurance companies, which currently cover more than 50 million members. For these customers, the company provides a win-win-win, as patients spend no time traveling and less time waiting, doctors are more efficient seeing more patients in less time, and payers (employers and plan sponsors) save money while being able to offer a highly popular additional benefit for their employees. This B to B market is projected to be a +$100 billion market opportunity and TDOC is the clear global market leader. For its direct-to- consumer clients, the company provides a growing suite of services for individuals to have affordable access to on-demand and scheduled medical services, for which their current insurance does not provide reimbursement (such as extended mental health counseling).
Although the company has been growing steadily for well over a decade, the business has transformed over the past few years as the COVID pandemic caused a significant increase in the demand for virtual healthcare. In addition, the company’s 2020 acquisitions of Livongo, the leader in virtual chronic condition management, and InTouch a competitive telehealth platform, materially broadened the company’s product offerings. At its recent analyst day, management guided to 25-30% top line growth for each of the next three years, exiting 2024 with more than $4 billion in annual revenue. The company also anticipates expanding margins by 100-150 basis points per year in each of the next three years, while still accelerating its investments in marketing and R&D. As with many of our recent purchases, we took advantage of the decline in the company’s shares (down a breathtaking 70% from its 2021 high of almost $300 per share) to establish a small position in Teladoc.”
2. Zoetis Inc. (NYSE:ZTS)
1623 Capital’s Stake Value: $4.97 million
Percentage of 1623 Capital’s 13F portfolio: 2.49%
Number of Hedge Fund Holders: 67
Zoetis Inc. (NYSE:ZTS) is the global leader in medicines for animals and livestock. It was formerly a subsidiary of Pfizer, and is headquartered in New Jersey.
On July 11, Piper Sandler analyst David Westenberg initiated coverage of Zoetis Inc. (NYSE:ZTS) with an ‘Overweight’ rating and a $205 price target. The analyst thinks the company still has more than 500 basis points of operating profit margin expansion available over the next 10 years, despite its already high operating margins. Westenberg pointed out that investors rarely find opportunities to buy “consistent growth stocks”, such as Zoetis, at these multiples. He also advised investors to target end markets in companion animal over food animal as pet owners are willing to pay for innovative treatments.
Investors were seen loading up on Zoetis Inc. (NYSE:ZTS) stock. At the end of March, 67 hedge funds disclosed ownership of positions in the company, in contrast to 61 hedge funds a quarter earlier. The firm’s largest Q1 shareholder was Arrowstreet Capital, with a $627.3 million stake which saw a 172% increase over the previous quarter.
1. Medtronic plc (NYSE:MDT)
1623 Capital’s Stake Value: $5.32 million
Percentage of 1623 Capital’s 13F portfolio: 2.66%
Number of Hedge Fund Holders: 54
Medtronic plc (NYSE:MDT) was the largest healthcare stock holding of 1623 Capital in the first quarter. The fund’s stake in MDT consisted of 48,000 shares priced at $5.32 million, accounting for a 2.66% slice of its total portfolio.
With operations in more than 140 countries around the world, Medtronic plc (NYSE:MDT) is a medical device company. It has posted increasing dividends for 44 years in a row, and has a $0.68 per share quarterly dividend, along with an impressive 3.07% yield as of July 12.
On the back of supply chain issues and latest quarterly results falling below estimates, many Wall Street analysts recently turned bearish on Medtronic plc (NYSE:MDT) shares. Wolfe Research analyst Mike Polark gave the firm an ‘Underperform’ rating in July, whilst Atlantic Equities analyst James Mainwaring downgraded Medtronic plc (NYSE:MDT) to ‘Neutral’ from ‘Overweight’ with a price target of $105, down from $125. He noted that the company “continues to be stuck in a negative earnings revision cycle” following its latest quarterly miss, despite management trying to post conservative guidance in recent quarters.
54 hedge funds from the Q1 database of Insider Monkey owned positions in Medtronic plc (NYSE:MDT), with a collective price tag of $1.98 billion. This is down from 55 hedge funds with $2.78 billion worth of stakes in the firm a quarter earlier. Diamond Hill Capital held a position in Medtronic plc (NYSE:MDT) exceeding $456 million, making it the firm’s largest shareholder in the first quarter of 2022.
Investment firm Polen Capital discussed the market position of Medtronic plc (NYSE:MDT) in its Q1 2022 investor letter, stating:
“Ireland-based Medtronic is a leading health care company focused on supplying many important life-saving devices like pacemakers, defibrillators, and insulin pumps. This is another company with attractive pricing power and a business model that can hold up well during inflationary periods. Medtronic has increased market share across almost 70% of its portfolio since the start of the pandemic, which is a higher percentage than even before the pandemic. With growth-oriented companies falling out of favor over the quarter, the stock’s relatively discounted valuation (at approximately 19x earnings) also bolstered its performance.”
You can also take a look at How Amazon Makes Money and 10 Best Manufacturing Stocks To Buy Now.
