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Is HCA Healthcare, Inc. (HCA) the Best Healthcare Stock For Long-Term Investment?

We recently published a list of 10 Best Healthcare Stocks For Long-Term Investment. In this article, we are going to take a look at where HCA Healthcare, Inc. (NYSE:HCA) stands against other best healthcare stocks for long-term investment.

Rising Healthcare Costs and the Impact of Tariffs on the US Industry

In the US, healthcare expenditures and costs have been increasing. According to the Centers for Medicare & Medicaid Services, US healthcare spending increased 7.5% from 2022 to $4.9 trillion in 2023. In 2023, the healthcare industry made up around 17.6% of the US economy, up 17.4% from 2022. The expansion of Medicare and commercial health insurance are the two main forces behind this growth.

The impact of tariffs on this continuing trend has become a major topic of contention in the healthcare sector, as more and more US corporations are turning to China for deals on the next promising molecule, whether in the obesity or cancer arena. Versant Ventures managing director Carlo Rizzuto spoke on the effects of tariffs on healthcare on CNBC’s “Fast Money” on February 7. Tariffs might affect the sector in two ways, according to Rizzuto. Products developed in China and introduced to the US or other markets would be the first. The sector would need to see how the tariffs are set up in the market to comprehend how they would impact such trade operations.

Second, and more concretely, the US healthcare industry uses China as a huge hub for contract production and research. As a result, anything that raises that expense is probably going to make the market more difficult. An increase in costs will not improve the running of the healthcare sector, which is already facing pressure from investors.

China’s Role in U.S. Healthcare and Long-Term Investment Opportunities

Speaking about China’s enormous influence in the pharmaceutical and healthcare industries, Rizzuto stated that the vast majority of healthcare organizations use a Chinese CRO or manufacturing partner in some capacity during the research and development phase. As a result, it plays a crucial role in the way biotech and pharmaceutical companies function in the nation. From the tiniest businesses to the biggest, this pattern is very common.

Simply said, the United States lacks the infrastructure to handle the transfer, thus healthcare corporations cannot reshore all of their externalized R&D and production to the country. Therefore, it is quite hard to understand how such a large-scale reshoring might occur. With the quantity of tariffs applied, the costs to accomplish this achievement can be computed linearly.

According to McKinsey, healthcare EBITDA is projected to rise from a baseline of $676 billion in 2023 to $987 billion in 2028 at a 7% CAGR. Recovery from post-pandemic lows is anticipated to support the improvement in several segments, while growth is anticipated to be faster in other areas (such as specialist pharmacy and HST). Software platforms are essential to the healthcare ecosystem because they make it possible for payers and providers to operate more effectively in a complicated setting.

By automating processes, fostering data connectivity, and producing actionable insights, technological innovation (such as generative AI and machine learning) keeps opening doors for stakeholders across all segments. McKinsey went on to say that increased utilization and pipeline expansion (as in cancer) are projected to drive substantial growth in specialty pharmacy revenue. Specialty pharmacy profit pools are still growing as a result of the rise in the use of specialty medications.

Our Methodology 

For our methodology, we used a Finviz screener and picked stocks with a market cap of over 2 billion, a 5-year annual return of over 10%, and a low PE ratio under 20. We then ranked these stocks based on their total number of hedge fund holders as of Q4 2024.

Why are we interested in the stocks that hedge funds pile into? 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

A team of healthcare professionals in lab coats and masks meeting at a hospital ward.

HCA Healthcare, Inc. (NYSE:HCA)

Number of Hedge Fund Holders: 81 

HCA Healthcare, Inc. (NYSE:HCA) owns and operates a network of hospitals and healthcare facilities across the US and tops the list for being one of the best healthcare stocks.  This network offers specialist treatments in fields like behavioral health, acute care, and outpatient operations. Serving a range of patient requirements is the goal of each of them.

In 2024, HCA Healthcare, Inc. (NYSE:HCA)’s hospital network experienced a 2.4% increase in emergency room visits, a 2.8% increase in inpatient procedures, and a 3% increase in inpatient admissions. Net revenue per equivalent admission increased by 2.9%, while overall revenue increased by 6%. With $5 to $5.2 billion set up for capital expenditures in 2025, the corporation is making investments in network development. Its main goals are shareholder profits and staff development. It just approved a new share repurchase program for $10 billion. Additionally, the business said that the 2024 hurricanes had a $250 million effect on the 2024 fiscal year.

HCA Healthcare Inc. (NYSE:HCA) anticipates $72.8 to $75.8 billion in sales and $24.05 to $25.85 in earnings per share in 2025. The company anticipates a 3-4% increase in equivalent admissions and a 2-3% increase in revenue per equivalent admission.

Delaware Ivy Core Equity Fund stated the following regarding HCA Healthcare Inc. (NYSE:HCA) in its Q3 2024 investor letter:

“HCA Healthcare, Inc. (NYSE:HCA) – While long-term growth trends favor the healthcare sector, HCA is also benefiting from a short-term surge in healthcare utilization, likely the consequence of consumers catching up on care that was deferred during the pandemic. Growth in the insured population through healthcare exchanges also appears to be a more secular driver of increased demand.”

Overall, HCA ranks 1st on our list of best healthcare stocks for long-term investment. While we acknowledge the potential of healthcare companies, 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 HCA 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 30 Best Stocks to Buy Now According to Billionaires

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

AI, Tariffs, Nuclear Power: One Undervalued Stock Connects ALL the Dots (Before It Explodes!)

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The “Toll Booth” Operator of the AI Energy Boom

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The Hedge Fund Secret That’s Starting to Leak Out

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A New Dawn is Coming to U.S. Stocks

I work for one of the largest independent financial publishers in the world – representing over 1 million people in 148 countries.

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Should I put my money in Artificial Intelligence?

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Marc’s been a trader, stockbroker, and analyst. He was the head of the options department at a major brokerage firm and is a sought-after expert for CNBC, Fox Business, Barron’s, and Yahoo! Finance…

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He’s used this system to survive nine bear markets… create three new indices for the Nasdaq… and even predict the brutal bear market of 2022, 90 days in advance.

Click to continue reading…