In this article, we will take a look at the 5 most undervalued healthcare stocks to buy according to hedge funds. To see more such companies, go directly to 13 Most Undervalued Healthcare Stocks To Buy According To Hedge Funds.
5. Moderna, Inc. (NASDAQ:MRNA)
Number of Hedge Fund Holders: 52
Moderna, Inc. (NASDAQ:MRNA) shares are in the limelight as investors look for catalysts beyond the COVID-19 vaccine. Recently, the US FDA gave Breakthrough Therapy status to Moderna, Inc. (NASDAQ:MRNA) and Merck’s (NYSE:MRK) personalized mRNA cancer vaccine mRNA-4157/V940, in combination with Keytruda, for the adjuvant treatment of patients with high-risk melanoma after complete resection.
Recently, Moderna, Inc. (NASDAQ:MRNA) posted its Q4 results. GAAP EPS in the period came in at $3.61, missing estimates by $1.14. Revenue in the quarter fell 29.3% on a YoY basis to $5.1 billion but beat estimates by $80 million.
Hedge fund sentiment for Moderna, Inc. (NASDAQ:MRNA) spiked in Q4. At the end of the quarter, 52 hedge funds in Insider Monkey’s database of 943 hedge funds reported owning stakes in Moderna, Inc. (NASDAQ:MRNA), up from 44 hedge funds in the previous quarter. The total value of these stakes was over $3.1 billion.
ClearBridge Select Strategy made the following comment about Moderna, Inc. (NASDAQ:MRNA) in its Q4 2022 investor letter:
“Moderna, Inc. (NASDAQ:MRNA) became a household name during the pandemic as one of the first developers of a COVID-19 vaccine. But the stock sold off sharply as COVID momentum, including high expectations for booster shots, began to wear off, causing investors to slash its fiscal 2023 earnings estimates by two-thirds over the last year. We believe those downward revisions clouded the prospects for the company’s fully funded pipeline of platform opportunities, including cancer, RSV and flu. The cash-rich company also recently expanded its partnership with Merck to improve cancer treatments.”
4. HCA Healthcare, Inc. (NYSE:HCA)
Number of Hedge Fund Holders: 64
Healthcare facilities operator HCA Healthcare, Inc. (NYSE:HCA) ranks 4th in our list of the most undervalued healthcare stocks to buy according to hedge funds. In January, HCA Healthcare, Inc. (NYSE:HCA) posted mixed Q4 results. GAAP EPS in the quarter came in at $7.28, easily beating estimates by $2.48. Revenue in the period jumped about 2.9% on a YoY basis to reach $15.5 billion but missed estimates by $130 million.
Adjusted EBITDA in the quarter totaled $3.179 billion. Cash flows from operating activities came in at $2.527 billion. For 2023, HCA Healthcare, Inc. (NYSE:HCA) expects its revenue to come in between $61.5 billion to $63.5 billion versus the consensus estimate of $62.80 billion.
Diamond Hill Large Cap Strategy made the following comment about HCA Healthcare, Inc. (NYSE:HCA) in its Q4 2022 investor letter:
“HCA Healthcare, Inc. (NYSE:HCA)’s stock price continued to advance in Q4 following a difficult first half of 2022. Fortunately, we did not own shares until the end of Q2. Two major factors that are top of mind for investors right now are volumes and labor constraints, both of which continue to normalize albeit at a relatively slow pace. We remain favorable on the longterm fundamentals of the business and the opportunity for HCA to reinvest the large amounts of cash it generates at attractive returns. That said, the discount to our intrinsic value estimate has narrowed significantly following robust returns in the second half of the year.”
3. Biogen Inc. (NASDAQ:BIIB)
Number of Hedge Fund Holders: 75
Massachusetts-based Biogen Inc. (NASDAQ:BIIB) ranks 3rd in our list of the most undervalued healthcare stocks to buy according to hedge funds. With a PE ratio under 15 and 75 hedge fund investors as of the end of the fourth quarter, Biogen Inc. (NASDAQ:BIIB) seems to have strong growth potential and investor sentiment.
In February, Biogen Inc. (NASDAQ:BIIB) posted Q4 results. Adjusted EPS in the quarter totaled $4.05, beating estimates by $0.57. Revenue in the quarter fell 7.3% on a YoY basis to reach $2.54 billion, beating estimates by $100 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. Pfizer Inc. (NYSE:PFE)
Number of Hedge Fund Holders: 75
Pfizer Inc. (NYSE:PFE) remains one of the most favorite healthcare stocks among the elite hedge funds in financial markets. Pfizer Inc. (NYSE:PFE) is moving beyond just the COVID-19 vaccines as the company has much to offer in terms of its pipeline to long-term investors. Recently, Pfizer Inc. (NYSE:PFE) announced that the FDA accepted its Biologics License Application (BLA) for its respiratory syncytial virus (RSV) vaccine candidate PF-06928316 for priority review. The treatment targets pregnant women for the prevention of RSV in infants.
As of the end of the fourth quarter of 2022, 75 hedge funds tracked by Insider Monkey reported owning stakes in Pfizer Inc. (NYSE:PFE). The net worth of these stakes was about $2.5 billion.
Diamond Hill Capital made the following comment about Pfizer Inc. (NYSE:PFE) in its Q3 2022 investor letter:
“Also among our bottom contributors were health care products manufacturer Abbott Labs, global pharmaceutical company Pfizer Inc. (NYSE:PFE), media and technology giant Alphabet, and insurance company American International Group (AIG). Although Pfizer continues to report strong performance of its core drugs, sales of its COVID vaccine and treatment have likely peaked and sales are expected to decline going forward. We remain optimistic about the company long term as we believe management is taking the company in the right direction, focusing R&D, and making strategic acquisitions with profits generated from COVID vaccine sales.”
1. The Cigna Group (NYSE:CI)
Number of Hedge Fund Holders: 76
The Cigna Group (NYSE:CI) shares have gained about 31% over the past year. Still, The Cigna Group (NYSE:CI) looks undervalued as its PE ratio is under 15 as of February 24. Recently, The Cigna Group (NYSE:CI) made its shareholders happy when it upped its dividend by 10%. Cigna (NYSE:CI) announced a quarterly dividend of $1.23 per share. The dividend is payable on March 23.
At the end of the last quarter of 2022, 76 hedge funds in Insider Monkey database reported owning stakes in The Cigna Group (NYSE:CI). The total value of these stakes as of the end of December 2022 was $4.4 billion. The biggest stakeholder of The Cigna Group (NYSE:CI) during this period was Rajiv Jain’s GQG Partners which had a massive $797 million stake in the firm.
Baron Funds made the following comment about Cigna Corporation (NYSE:CI) in its Q4 2022 investor letter:
“We initiated a position in Cigna Corporation (NYSE:CI), a health services organization with two primary segments, Cigna Healthcare and Evernorth. Cigna Healthcare provides health insurance products, including a business in which Cigna provides administrative services only to plan sponsors (employers, unions, and other groups). Evernorth provides a portfolio of health care services, including pharmacy benefit management (PBM) services, care delivery services, data and analytics solutions, and distribution of specialty drugs. Each segment has a portion of business that provides steady, predictable growth. These foundational businesses, which account for roughly 60% of total revenue, include the U.S. commercial business, the PBM business, and international. The other 40% of revenue comes from higher-growth businesses, including the specialty pharmacy business, care delivery services, and Medicare Advantage. Management targets 10% to 13% annual EPS growth over the long term. The stock trades at a significant discount to industry peers because of the company’s commercial health insurance and PBM business mix. We think the PBM business will benefit from the biosimilar wave in the next few years, and as Cigna’s higher growth businesses become a bigger percentage of the overall mix, we think the stock can appreciate at least in line with its annual EPS growth with potential for valuation expansion.”
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