This article presents an overview of Jim Cramer’s 5 Favorite Healthcare Stock Picks in 2024. For a detailed overview of such stocks, read our article, Jim Cramer’s 10 Favorite Healthcare Stock Picks in 2024.
5. GE Healthcare Technologies Inc (NASDAQ:GEHC)
Number of Hedge Fund Investors: 44
Jim Cramer has been excited about GE Healthcare Technologies Inc’s (NASDAQ:GEHC) use of AI in its MRI technologies. In December, Cramer said that GE Healthcare Technologies Inc (NASDAQ:GEHC) was “mispriced.” Last month, he said that GE Healthcare Technologies Inc (NASDAQ:GEHC) stock can go higher.
“You want a stock that goes higher? That’s GE Healthcare.”
Last month, GE Healthcare Technologies Inc (NASDAQ:GEHC) revealed Prostate Volume Assist (PVA), an AI-based software that helps clinicians with prostate volume measurements.
Cooper Investors Global Equities Fund stated the following regarding GE HealthCare Technologies Inc. (NASDAQ:GEHC) in its fourth quarter 2023 investor letter:
“During the quarter the portfolio initiated a position in GE HealthCare Technologies Inc. (NASDAQ:GEHC). GEHC is the former Healthcare division of GE, spun out in early 2023. It’s a global leader in imaging equipment such as MRI machines, CT scanners and ultrasound systems along with associated consumables. The business has a long and storied history but was trapped inside a larger, underperforming conglomerate, starved of the love and attention it needed to thrive.
From a subset of value perspective, we view GEHC as a Low risk turnaround. The underlying business is fundamentally sound but has ceded market share over time, with sales growth lagging the industry. There is significant margin opportunity with core imaging margins (~50% of sales) much lower than its main peer. We see two drivers in restoring performance. Firstly an increase in research and development spending (since 2017 R&D spend is up 70%, far outpacing revenue growth). Secondly an opportunity to improve SG&A cost efficiency.
What makes the turnaround low risk? Management and Board quality are critical. GEHC features a few of what we call ‘CI Alumni’; executives we have invested behind at other companies. Top of this list is Chairman Larry Culp, the former CEO of Danaher, an executive we have the highest respect for.
GEHC has strong financial characteristics. It is a market leader in an oligopolistic industry where market share changes slowly and gross profit comes largely from aftermarket. The balance sheet is appropriately geared with well structured debt. Our analysis of GEHC’s accounts suggests there may be some conservatism baked into the P&L numbers. At today’s share price you don’t need to assume much going right to do well, which partially reflects the backdrop of healthcare stocks having been under pressure this year. If GEHC can deliver on its potential, the upside is significant.”
