We recently published a list of the 10 Best Performing Healthcare Stocks So Far in 2025. In this article, we are going to take a look at where Inari Medical, Inc. (NASDAQ:NARI) stands against other best performing healthcare stocks so far in 2025.

The Healthcare Sector and its Dynamics in the Stock Market

Despite the ongoing craze surrounding the GLP-1 obesity drugs, the healthcare sector was a lagger last year. On January 3, Jared Holz, Mizuho Securities America’s healthcare sector strategist, appeared on CNBC’s ‘Squawk on the Street’ to talk about the healthcare sector’s outlook in 2025. While he anticipates another year of underperformance for the sector, he also believes that healthcare has “been so bad, maybe it’s gonna be good” in 2025.

Holz further said that the healthcare sector presents a calamity since there aren’t a lot of easy spaces in the domain. Other industry verticals, such as technology and financials, are well set up. Healthcare, in contrast, appears to have several variables in place, and most of them are not positive. However, he believed that the MedTech sector provides a sort of safety net in such a tumultuous sector. We talked about the medical device sector and the future of the healthcare industry in the US in a recently published article on 10 Best Medical Device Stocks To Buy According to Hedge Funds. Here is an excerpt from the article:

“According to McKinsey, the healthcare industry is expected to continually undergo a shift in growth dynamics. Health services and technology (HST) revenue pools are anticipated to grow at a compound annual growth rate of 8% between 2023 and 2028, supported by double-digit growth in software platforms and advanced data and analytics. The sales of innovative technologies such as generative AI to payers and providers are further supporting this growth.

In addition, pharmacy services, especially those focused on specialty pharmacy, are expected to see continued growth. The launch of new therapies and increased utilization are expected to be the primary drivers of this growth. McKinsey estimates specialty pharmacy revenue will grow at a compound annual growth rate of 8% between 2023 and 2028, growing EBITDA for managed service providers and specialty pharmacies.

Therefore, optimistic trends are materializing for the healthcare industry as a whole, including the medical device sector”.

AI and its Use in Healthcare: Is It All a Hoax?

Talking about the recent trends involving the increasing use of AI in the healthcare sector, Holz said that the scenario is possibly helping the software and technology companies more than healthcare ones. AI and its impact on drug development in clinical trials is another significant subject of discussion in the healthcare sector. However, Holz said that the industry is not really seeing the positive impact of the adoption of AI in the sector. Several clinical trials employing AI have failed in the recent past.

So, even though it seems that the science and technology behind the scenes is getting better, it hasn’t necessarily translated to better drug development and higher approval rates. Although he expects that the use of AI may lead to better results in the future, Holz believes that it is too early to make generalizations that the AI craze will lead to better results for biotech or pharma, at least in the near term.

Our Methodology

We used Finviz to screen healthcare stocks and looked at their year-to-date (YTD) performance, as of February 17, 2025, to select the best performing stocks. We also included the number of hedge fund holders for each stock as of Q3 2024. We sourced the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of year-to-date performance.

Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Inari Medical, Inc. (NASDAQ:NARI)

YTD Performance: 56.57%

Number of Hedge Fund Holders: 27

Inari Medical, Inc. (NASDAQ:NARI) is a medical device company that develops, manufactures, and markets devices for the interventional treatment of venous diseases. Its products primarily comprise FlowTriever and ClotTriever systems, which are used to treat venous thromboembolism (VTE), deep vein thrombosis (DVT), and pulmonary embolism (PE). The company also has an InThrill system that removes emboli and thrombi from the peripheral vasculature and the LimFlow system for chronic limb-threatening ischemia, in addition to other offerings. Inari Medical, Inc.’s (NASDAQ:NARI) stock is gaining value after a buyout deal from Stryker, which announced that it is buying Inari Medical, Inc. (NASDAQ:NARI) for $4.9 billion at $80 per share in cash.

Inari Medical, Inc. (NASDAQ:NARI) has strong financials. It reported a revenue of $153.4 million in fiscal Q3 2024, up 21.4% compared to $126.4 million in fiscal Q3 2023. Gross profit was $133.5 million for fiscal Q3 2024, compared to $111.9 million in the same quarter last year. This growth was attributed to an expansion in its sales territories, increased adoption of its procedures, the opening of new accounts, global commercial expansion, and the introduction of new products.

Baron Discovery Fund stated the following regarding Inari Medical, Inc. (NASDAQ:NARI) in its Q3 2024 investor letter:

“We added to our position in Inari Medical, Inc. (NASDAQ:NARI) in the quarter at what we believe are attractive valuations for a market leading medical device company. Inari offers catheter-based devices to remove clots caused by venous thromboembolism (VTE). VTE is a disease state that manifests as deep vein thrombosis (DVT), in which a clot cuts off blood flow in a deep vein (usually in the leg), and as pulmonary embolism (PE), when the clot in the leg breaks off and circulates to lodge in the blood vessels that supply the lungs. Despite beating its second quarter earnings and raising full-year guidance, Inari shares have been pressured after the release of competitor Penumbra, Inc.’s new product for DVT treatment. Both companies have very good products for DVT. We believe that there are huge opportunities for both companies to grow in DVT (by displacing other treatments), and Inari, in particular, has even bigger opportunities in PE (which it dominates) also by displacing other treatments.

PE and DVT are each markets worth about $3 billion per year (a $6 billion total market opportunity). Right now, about 80% receive just blood thinners which do nothing for existing clots, while only 20% receive any sort of more in-depth intervention. And then of this 20%, still a third are on thrombolytics, which has a high risk of bleeding and require an ICU stay for monitoring. Inari is working on studies that it believes will show superiority of its devices to using lytics or blood thinners. Its first PE study (superiority of an Inari device to using lytics) is due to read out in the fourth quarter of 2024. It has another PE study which should read out over the next couple of years that should help open up the remaining 80% of the PE market (superiority of an Inari device versus using blood thinners). In addition, Inari is at various stages of launching multiple new products (for other venous and arterial blockage conditions) which could unlock nearly $4 billion in additional addressable market opportunities. And it is launching its products in foreign markets as well. In other words, although a portion of its markets are facing increased competition, we believe there is a huge amount of overall growth opportunity that is wide open for Inari, and the stock is trading at a valuation that currently does not reflect these opportunities.”

Overall, NARI ranks 6th on our list of the best performing healthcare stocks so far in 2025. While we acknowledge the potential of NARI, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NARI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap

Disclosure: None. This article is originally published at Insider Monkey.