In this article, we will discuss the 10 best medical stocks under $10.
According to the Centers for Medicare and Medicaid Services, U.S spending on national healthcare touched $4.1 trillion in 2020, which amounts to an expenditure of $12,530 per person. The total level of U.S healthcare spending is predicted to increase to $6.2 trillion by 2028. Furthermore, Deloitte estimates that spending levels will rise to $8.3 trillion by the end of 2040. The adoption of new health-focused technologies by organizations is a significant contributor to these high levels of spending in the healthcare sector. In 2020, U.S healthcare organizations and facilities were estimated to have spent $11.36 billion on cloud-based technologies, reflecting an increase of 33% from 2019. Healthcare providers are backing innovation that supports crucial monitoring, early diagnosis, and illness prevention by capitalizing on the rise in individuals who want to take a more active role in managing their own health.
EBITDA for the healthcare sector increased by 5% between 2017 and 2019 but declined in 2020 and 2021. McKinsey projects post-COVID-19 growth to be 6% between 2021 and 2025. An additional profit of $31 billion might be generated by the sector during this period if it expands at the predicted growth rate. However, the projections do not take into account the possible effects of macroeconomic challenges, such as prolonged inflation. In case the rise in inflation continues at the current rates, profits might decrease by over $70 billion.
A Defensive Play
The medical sector lagged behind the S&P 500 Index in 2021. The Health Care Select Sector SPDR Fund (NYSEARCA:XLV), which is considered a benchmark for medical stocks, experienced an increase of 24.2% in 2021 but underperformed against the S&P 500 Index, which rose by 27.7% during the same period. In contrast, since the start of 2022, the Health Care Select Sector SPDR Fund has observed a decline of 6.7% as compared to the S&P 500 Index’s decline of 13.3%.
During the pandemic, the healthcare industry experienced a significant surge of investment from the technology and consumer industries. Global investments in health innovation totaled $44 billion in 2021 alone, double that of 2020, while the purchase of health and health tech firms increased by 50%. Notable firms like Moderna, Inc. (NASDAQ:MRNA), Pfizer Inc. (NYSE:PFE), and Johnson & Johnson (NYSE:JNJ) were amongst the companies that made significant investment contributions.
Some medical stocks are still enjoying the push provided by the COVID-19 pandemic, while others have seen their stock price bounce back as the demand for elective procedures rose in the wake of declining rates of Covid hospitalizations. During periods of increasing inflation and rising interest rates, medical stocks are considered a strong defensive play. Analysts at Morgan Stanley and Goldman Sachs see medical stocks as reasonably valued in comparison to stocks in other defensive sectors. The healthcare industry, which includes major pharmaceutical businesses, manufacturers of medical equipment, health insurance providers, and biotech companies, has performed better in terms of earnings in recent economic downturns. In light of growing recession concerns and the Federal Reserve’s persistent tightening of monetary policy, they are therefore a desirable option for investors seeking assets that can withstand a prospective slump.
Photo by National Cancer Institute on Unsplash
Our Methodology
Keeping the future prospects of the healthcare industry in view, we have produced a list of the 10 best medical stocks under $10. To shortlist the stocks, we have analyzed the company’s strength of operations in the recent past as well as positive catalysts for future growth. The stocks have been ranked according to the hedge fund sentiment as of Q1 2022.
10 Best Medical Stocks Under $10
10. Haleon plc (NYSE:HLN)
Stock Price as of August 2: $7.40
Haleon plc (NYSE:HLN) has become one of the biggest consumer healthcare businesses globally after the business was spun-off from GSK plc (NYSE:GSK) on July 18. Centrum, Eno, Panadol, Sensodyne, and Tums are some of the examples of the leading brands that are a part of the company’s portfolio.
On July 25, coverage on the Surrey, UK-based company was initiated by Spin-Off Research with a ‘Buy’ rating and target price of $9. Haleon plc (NYSE:HLN) has the second-biggest Consumer Health platform and stands as the market leader in the over-the-counter drug segment. The company’s strong position in the market provides investors with a unique investment opportunity for the long term.
Haleon plc (NYSE:HLN) intends to gain further market share to deliver on its promise of achieving 4% to 6% like-for-like growth. This could be challenging in the competitive U.S medical market, but the company’s presence in mature categories can aid in achieving this goal. Furthermore, analysts believe the current valuation of Haleon plc (NYSE:HLN) stock does not represent the company’s history of consistently delivering above-guidance organic sales growth. If Haleon plc (NYSE:HLN) continues on the same growth trajectory, it is likely to generate robust returns for investors in the long term.
9. Grifols, S.A. (NASDAQ:GRFS)
Number of Hedge Fund Holders: 10
Stock Price as of August 2: $8.29
Grifols, S.A. (NASDAQ:GRFS) is a Barcelona, Spain-based healthcare company established in 1909. The company is involved in developing therapies from blood plasma.
On July 15, Tom Jones at Berenberg gave Grifols, S.A. stock a ‘Buy’ rating with a price target of $26. The company is expected to benefit from the recessionary environment, but it might need to raise additional capital to account for its debt position.
Grifols, S.A. completed the acquisition of Biotest AG in April, and experts see it as a perfect fit with the company’s overall portfolio. The Biotest acquisition is expected to support the valuation of Grifols, S.A.. During the first-half of 2022, Grifols, S.A. reported total sales of $2.8 billion, which reflects an increase of 10.8% YoY. Compared to its European and Australian competitors, analysts see Grifols, S.A.’s stock trading at a P/E discount of 40%.
At the end of Q1 2022, 10 hedge funds held a cumulative stake worth over $126 million in Grifols, S.A..
8. GoodRx Holdings, Inc. (NASDAQ:GDRX)
Number of Hedge Fund Holders: 24
Stock Price as of August 2: $6.08
GoodRx Holdings, Inc. (NASDAQ:GDRX) is a Santa Monica, California-based consumer-centric digital healthcare platform. The company has a telemedicine platform, mobile application, and a website that tracks prescription prices across the U.S and provides free discount coupons on medications. GoodRx Holdings, Inc. covers more than 75,000 pharmacies across the U.S.
On July 20, Steve Valiquette at Barclays gave GoodRx Holdings, Inc. shares a target price of $12 and reiterated an ‘Overweight’ rating on them ahead of the company’s Q2 2022 results to be published on August 8. GoodRx Holdings, Inc. is expected to report adjusted EPS of $0.04 and revenue of $184.71 million, the latter figure reflecting an increase of 4.1% from the same period last year. Analysts anticipate the company staging a gradual recovery following the pandemic and see GoodRx Holdings, Inc. offering high strategic value to investors in the healthcare sector.
Light Street Capital raised its stake in GoodRx Holdings, Inc. by 196% during the first quarter of the year.
7. MultiPlan Corporation (NYSE:MPLN)
Number of Hedge Fund Holders: 24
Stock Price as of August 2: $5.20
MultiPlan Corporation (NYSE:MPLN) is a New York-based provider of solutions related to healthcare cost management. The company brings into play data analytics and technology to provide efficient claim cost management and other solutions. MultiPlan Corporation claims to save $19 billion annually for its 700 healthcare payers as of July 2022.
On July 12, Cindy Motz at Goldman Sachs initiated coverage on MultiPlan Corporation stock with a ‘Neutral’ rating and a target price of $6.50. MultiPlan Corporation is set to announce its Q2 2022 results on August 4. The analyst anticipates the company’s revenue growth to be in the range of 4% to 7%.
In the first quarter of the year, MultiPlan Corporation’s adjusted EBITDA recorded a YoY rise of 17.9%. According to certain valuation models, MultiPlan Corporation is currently trading at a discount of 70% to its actual value. The company has a bright future which makes the present levels an attractive entry point for investors.
MultiPlan Corporation was held by 24 hedge funds at the end of Q1 2022.
6. Amicus Therapeutics, Inc. (NASDAQ:FOLD)
Number of Hedge Fund Holders: 24
Stock Price as of August 2: $9.96
Amicus Therapeutics, Inc. (NASDAQ:FOLD) is a Philadelphia, Pennsylvania-based biotech company involved in developing treatments for rare metabolic diseases.
Amicus Therapeutics, Inc. is enjoying strong sales growth due to its leading medicine Galafold, the only oral treatment for Farby disease. The company is also anticipating the approval of its AT-GAA for the treatment of Pompe disease. Amicus Therapeutics, Inc. is set to report its Q2 2022 results on August 4. Analysts anticipate the company reporting revenue of $85.88 million, reflecting an increase of 10% from the same quarter last year.
Joseph Edelman’s Perceptive Advisors is the biggest hedge fund holder of Amicus Therapeutics, Inc. stock, with a stake valued at $260.95 million as of Q1 2022.
While medical stocks like Moderna, Inc., Pfizer Inc., and Johnson & Johnson are more popular amongst hedge funds, Amicus Therapeutics, Inc. offers investors an opportunity to purchase a stock with high earnings generation capacity at a much lower price.
5. Roivant Sciences Ltd. (NASDAQ:ROIV)
Number of Hedge Fund Holders: 27
Stock Price as of August 2: $3.70
Roivant Sciences Ltd. (NASDAQ:ROIV) is a Basel, Switzerland-based healthcare company founded in 2014 by Vivek Ramaswamy. The company is incorporating technology into the development of new drugs.
Roivant Sciences Ltd. has shifted all its resources to maximizing sales for its VTAMA cream for plaque psoriasis and has also joined forces with Pfizer, Inc. by launching Priovant Therapeutics. The US Food and Drug Administration approved the VTAMA cream on May 24, making it the first steroid-free treatment given the go-ahead by the regulatory authority. Analysts think that Roivant Sciences Ltd. is sitting on a $2 billion-plus drug, which could propel the company’s current market capitalization of $2.60 billion to new heights.
Overall, 27 hedge funds held a stake in Roivant Sciences Ltd. as of Q1 2022.
4. Ginkgo Bioworks Holdings, Inc. (NYSE:DNA)
Number of Hedge Fund Holders: 30
Stock Price as of August 2: $3.00
Ginkgo Bioworks Holdings, Inc. (NYSE:DNA) is a Boston, Massachusetts-based biotech company that uses genetic engineering to create bacteria for industrial uses.
The company intends to complete the acquisition of Zymergen Inc. (NASDAQ:ZY), a biotech company, in an all-stock transaction of $300 million by the end of Q1 2023. The holder of one share of Zymergen will receive 0.9179 shares of Ginkgo Bioworks Holdings, Inc.. This would mean that the shareholders of Zymergen will have Pro-forma ownership of 5.25% in Gingko. The deal is Ginkgo Bioworks Holdings, Inc.’s largest acquisition to date. It would help the company expand its horizontal platform, which targets customers in different sectors.
Ginkgo Bioworks Holdings, Inc. has notable hedge funds like Viking Global and Ark Investment Management among its top 10 shareholders as of Q1 2022. On July 5, Viking Global Investors increased its ownership stake in Ginkgo Bioworks Holdings, Inc. from 6.5% to 9.7% by acquiring an additional 64.02 million shares in the company.
3. Cano Health, Inc. (NYSE:CANO)
Number of Hedge Fund Holders: 38
Stock Price as of August 2: $6.42
Cano Health, Inc. (NYSE:CANO) is a Miami, Florida-based primary care provider.
On June 24, John Ransom at Raymond James initiated coverage on Cano Health, Inc. with an ‘Outperform’ rating and a target price of $8. The analyst thinks that the entity is in a position to deliver growth driven by the support of Medicare Advantage. Cano Health, Inc. is planning to deliver 44% YoY growth by adding 54 to 59 new medical centers into its network in 2022. The analyst anticipates the company’s revenue will compound annually by 30%, while adjusted EBITDA will grow at a 20% CAGR through 2024. Ransom also added that Cano Health, Inc.’s focus on the build-buy-manage strategy sets the company apart from its competitors.
Of the 912 hedge funds in Insider Monkey’s database, 38 elite funds held a stake in Cano Health, Inc. at the end of Q1 2022.
2. EQRx, Inc. (NASDAQ:EQRX)
Number of Hedge Fund Holders: 38
Stock Price as of August 2: $5.07
EQRx, Inc. (NASDAQ:EQRX) is a Cambridge, Massachusetts-based biotech company working on recreating the drug discovery process and introducing medicines at significantly lower prices with global accessibility.
On June 13, Chris Shibutani at Goldman Sachs commenced coverage on EQRx, Inc. with a ‘Buy’ rating and a target price of $8. The target price assumes potential upside of over 57% from the closing price as of August 2, which still reflects an attractive entry point for potential investors. The analyst thinks that the current stock price is significantly underappreciated and reflects unnecessarily bearish views on the approval of the company’s two lead candidates aumolertinib and sugemalimab. Shibutani expressed confidence in EQRx, Inc.’s ability to deliver on its strategic mission. Furthermore, EQRx, Inc. has filed for a marketing authorization application for aumolertinib with the UK Medicines and Healthcare products Regulatory Agency.
The number of hedge funds with an ownership stake in EQRx, Inc. increased from 31 in Q4 2021 to 38 in the first quarter of 2022.
1. Viatris Inc. (NASDAQ:VTRS)
Number of Hedge Fund Holders: 55
Stock Price as of August 2: $9.66
Viatris Inc. (NASDAQ:VTRS) is a Canonsburg, Pennsylvania-based healthcare and pharmaceutical corporation. The firm was created in November 2020 following the merger of Mylan and Upjohn, which was a legacy division of Pfizer, Inc..
As of August 2, Viatris Inc. stock offers an attractive dividend yield of over 4.9%. Furthermore, the company is looking into executing a share buyback plan in the wake of the cash it generated through an asset sale. Approximately 8.5% in shareholder value will be generated through a share buyback plan of $1 billion. Viatris Inc. is set to announce its Q2 2022 results on August 8. The consensus revenue and adjusted EPS estimate for Viatris Inc. stands at $4.18 billion and $0.83, respectively. Experts rate Viatris Inc. as a ‘Buy’ below the $10 level as the risk/reward profile of the stock is favorable for long-term investors.
Davis Funds discussed its outlook on Viatris Inc. in its Q4 2021 investor letter. Here’s what the firm said:
“Healthcare is included in the portfolio both for company-specific reasons, as well as big picture trends. At the company level, we hold select companies in pharmaceuticals, healthcare services and health insurance at attractive valuations. This is at a time when the average age of the U.S. population is fast approaching 40, older than Asia-Pacific and a little younger than the aged populations of Europe and Japan. The number of seniors in the U.S.—i.e., 65 years or older— now surpasses 54 million, or about 15% of the population. Seniors, on average, take a much greater number of medications and account for a large and disproportionate share of healthcare spending, and we expect that trend to continue due to both raw demographics and a proliferation in the number of available treatments and services available now, the latter being driven by innovation and investment in the healthcare industry. Representative holdings in the Fund include Cigna, United Health Group, Viatris and Quest Diagnostics.”
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This article is originally published at Insider Monkey.
