In this article, we discuss top 10 healthcare stocks to buy.

Focus in the healthcare sector has steadily been shifting away from the coronavirus pandemic to diversification, vertical integration, and new business building in the past few months. According to a report by consulting firm McKinsey, innovation and growth have continued unabated in the healthcare industry despite persistent inflation in consumer prices. Volatile investment conditions and a tight labor market, however, continue to present operating and financial challenges for healthcare leaders.

Stephanie Allen, a leader in the global public health and social services world, told research firm Deloitte recently that COVID-19 has accelerated numerous trends in the healthcare sector, particularly around health equity and sustainability. Allen claims that shifting consumer preferences and behavior, the integration of life sciences and healthcare sector, rapidly evolving digital health technologies, new talent and care delivery models, and clinical innovation continue to be top of mind for healthcare executives globally. 

Some of the top healthcare stocks to buy in this context include Thermo Fisher Scientific Inc. (NYSE:TMO), UnitedHealth Group Incorporated (NYSE:UNH), and Johnson & Johnson (NYSE:JNJ). McKinsey estimates that the healthcare sector will grow at a compound annual growth rate of 6% between 2021 and 2025, adding about $31 billion in profits during the time. The firm has also warned that profits could decline by more than $70 billion during this period if inflation continues unchecked. 

Our Methodology

The companies that operate in the healthcare sector were selected for the list. In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks are also discussed. Data from around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.

Top Healthcare Stocks to Buy

10. Teladoc Health, Inc. (NYSE:TDOC)

Number of Hedge Fund Holders: 32    

Teladoc Health, Inc. (NYSE:TDOC) provides virtual healthcare services in the United States and internationally. It is one of the best healthcare stocks to invest in. On August 26, the company announced that it had partnered with Cloud DX, which provides remote patient monitoring, to better serve the remote monitoring needs of patients in Canada. Under this partnership, existing remote patient monitoring services of Cloud DX platform in Canada will be enhanced with the virtual care capabilities of Teladoc.

On September 27, Deutsche Bank analyst George Hill maintained a Hold rating on Teladoc Health, Inc. (NYSE:TDOC) stock and lowered the price target to $31 from $34, noting the business of the firm had matured rapidly during the pandemic. 

At the end of the second quarter of 2022, 32 hedge funds in the database of Insider Monkey held stakes worth $1.2 billion in Teladoc Health, Inc. (NYSE:TDOC), compared to 36 the preceding quarter worth $1.97 billion.

Just like Thermo Fisher Scientific Inc. (NYSE:TMO), UnitedHealth Group Incorporated (NYSE:UNH), and Johnson & Johnson (NYSE:JNJ), Teladoc Health, Inc. (NYSE:TDOC) is one of the best healthcare stocks to buy according to hedge funds. 

In its Q1 2022 investor letter, RiverPark Funds, an asset management firm, highlighted a few stocks and Teladoc Health, Inc. (NYSE:TDOC) was one of them. Here is what the fund said:

“Teladoc Health, Inc. (NYSE:TDOC) is the largest telehealth provider in the US and has recently begun to expand internationally. TDOC’s platform enables an ever-expanding list of patient-doctor interactions (including those for primary health care, mental health issues and chronic condition management) to transition from an on-site visit to one that can be done remotely with full video- based interaction. TDOC provides its platform of services on both a business-to-business and direct-to-consumer basis, through monthly subscription-based relationships. For its core business-to-business clients, the company contracts with a wide range of entities, including large scale employers (the company currently contracts with over 50% of the Fortune 500), health plans, health systems, and medical insurance companies, which currently cover more than 50 million members. For these customers, the company provides a win-win-win, as patients spend no time traveling and less time waiting, doctors are more efficient seeing more patients in less time, and payers (employers and plan sponsors) save money while being able to offer a highly popular additional benefit for their employees. This B to B market is projected to be a +$100 billion market opportunity and TDOC is the clear global market leader. For its direct-to- consumer clients, the company provides a growing suite of services for individuals to have affordable access to on-demand and scheduled medical services, for which their current insurance does not provide reimbursement (such as extended mental health counseling) (…read more)

9. Bio-Rad Laboratories, Inc. (NYSE:BIO)

Number of Hedge Fund Holders: 43    

Bio-Rad Laboratories, Inc. (NYSE:BIO) manufactures and distributes life science research and clinical diagnostic products in the United States, Europe, Asia, Canada, and Latin America. It is one of the top healthcare stocks to invest in. On October 10, The Wall Street Journal reported that the diagnostics company was in talks with competitor Qiagen N.V for a merger deal. This deal could be worth more than $41 billion, per the report. 

On August 24, Credit Suisse analyst Dan Leonard initiated coverage of Bio-Rad Laboratories, Inc. (NYSE:BIO) stock with an Outperform rating and a $715 price target, noting that the company has margin expansion opportunities in the coming months. 

At the end of the second quarter of 2022, 43 hedge funds in the database of Insider Monkey held stakes worth $1.3 billion in Bio-Rad Laboratories, Inc. (NYSE:BIO), compared to 45 in the previous quarter worth $1.6 billion.

8. Zoetis Inc. (NYSE:ZTS)

Number of Hedge Fund Holders: 62    

Zoetis, Inc. (NYSE:ZTS) discovers, develops, manufactures, and commercializes animal health medicines, vaccines, and diagnostic products in the United States and internationally. It is one of the premier healthcare stocks to invest in. On September 5, the company revealed that it had acquired NewMetrica, a Scottish animal health-related digital tool developer. The drugmaker said that this acquisition will enhance their capabilities across the continuum of care and will advance their expertise in qualities of life assessments. 

Among the hedge funds being tracked by Insider Monkey, California-based investment firm Arrowstreet Capital is a leading shareholder in Zoetis, Inc. (NYSE:ZTS), with 2.1 million shares worth more than $359 million. 

In its Q1 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Zoetis, Inc. (NYSE:ZTS) was one of them. Here is what the fund said:

“Shares of Zoetis, Inc. (NYSE:ZTS), the global leader in the discovery, development, and manufacturing of companion and farm animal health medicine and vaccines, fell along with shares of other high-multiple 2021 standout performers. We retain conviction as Zoetis recently reported a top and bottom line beat with more than 21% growth driven by dermatology, parasiticides, and recently launched monoclonal osteoarthritic treatments. The company’s 2022 guidance was in line with Street expectations, calling for 9% to 11% operational revenue growth and modest margin expansion despite heavy investment in core growth drivers.”

7. HCA Healthcare, Inc. (NYSE:HCA)

Number of Hedge Fund Holders: 63    

HCA Healthcare, Inc. (NYSE:HCA) provides healthcare services in the United States. It is one of the major healthcare stocks to invest in. On June 23, the company announced that it was partnering with Mckesson, a drug distributor, for a joint venture to create a fully integrated oncology research organization combining their respective research arms. This joint venture focuses on expanding clinical research services to improve the risk of cancer and treatment options for patients.

On September 16, investment advisory Raymond James maintained an Outperform rating on HCA Healthcare, Inc. (NYSE:HCA) stock and raised the price target to $250 from $230. Analyst John Ransom issued the ratings update. 

At the end of the second quarter of 2022, 63 hedge funds in the database of Insider Monkey held stakes worth $2.1 billion in HCA Healthcare, Inc. (NYSE:HCA), compared to 62 the preceding quarter worth $2.9 billion.

In its Q2 2022 investor letter, Diamond Hill Capital Management, an asset management firm, highlighted a few stocks and HCA Healthcare, Inc. (NYSE:HCA) was one of them. Here is what the fund said:

“HCA Healthcare, Inc. (NYSE:HCA) is a best-in-class operator of acute care hospitals and other health care facilities, including outpatient surgery centers. It has a strong market presence in highly attractive geographies with growing populations and low unemployment, such as Texas and Florida, which leads to a favorable payor mix. We are further attracted to its strong management team that has a stellar track record of deploying capital, and the founding family continues to own almost a quarter of the business. We initiated a position after HCA reported Q1 earnings — it reduced full year guidance due to increased labor costs and lower-than-expected acuity among COVID admissions, dampening near-term investor sentiment.”

6. CVS Health Corporation (NYSE:CVS)

Number of Hedge Fund Holders: 65  

CVS Health Corporation (NYSE:CVS) provides health services in the United States. It is one of the elite healthcare stocks to invest in. On September 29, the company announced that it had extended an existing partnership with McKesson, a health information technology and pharmaceutical distribution company, to distribute pharmaceuticals of the latter through June 2027. The distribution extends to mail order and retail distribution pharmacies. 

On September 7, investment advisory Evercore ISI maintained an Outperform rating on CVS Health Corporation (NYSE:CVS) stock and raised the price target to $125 from $120. Analyst Elizabeth Anderson issued the ratings update. 

Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm AQR Capital Management is a leading shareholder in CVS Health Corporation (NYSE:CVS), with 3.4 million shares worth more than $312.7 million.

In addition to Thermo Fisher Scientific Inc. (NYSE:TMO), UnitedHealth Group Incorporated (NYSE:UNH), and Johnson & Johnson (NYSE:JNJ), CVS Health Corporation (NYSE:CVS) is one of the best healthcare stocks to buy according to hedge funds. 

In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and CVS Health Corporation (NYSE:CVS) was one of them. Here is what the fund said:

“Improving health remains a key impact theme for the portfolio, and over the past year or so we have increased our exposure to the health care sector, through the addition of CVS Health Corporation (NYSE:CVS)CVS Health Corporation (NYSE:CVS), which is well-positioned to help define the future of health care in terms of costs, quality and convenience.”

5. Pfizer Inc. (NYSE:PFE)

Number of Hedge Fund Holders: 70 

Pfizer Inc. (NYSE:PFE) discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. It is one of the best healthcare stocks to invest in. On August 1, investment advisory Barclays maintained an Equal Weight rating on Pfizer  Inc. (NYSE:PFE) stock and raised the price target to $52 from $50. Analyst Carter Gould issued the ratings update. 

Among the hedge funds being tracked by Insider Monkey, Washington-based firm AQR Capital Management is a leading shareholder in Pfizer Inc. (NYSE:PFE), with 10.6 million shares worth more than $553.9 million. 

In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Pfizer Inc. (NYSE:PFE) was one of them. Here is what the fund said:

“While the level of general turnover abated as we progressed through 2021, it remained high in one area: post-COVID-19 recovery plays. The concept behind this investment thesis was, and still is, straightforward: with the advent of effective vaccines, the path from pandemic to endemic is just a matter of time. As this transition occurs, the estimated excess savings of over $2 trillion built up on U.S. consumer balance sheets will unlock dramatic pent-up demand for experiences, especially global travel. This investment case seemed especially compelling when the Pfizer Inc. (NYSE:PFE) vaccine positively surprised markets in November 2020. As a result, we made post-COVID-19 stocks (which were trading well below our estimate of recovery value) a sizable theme within the portfolio. We understood this to be a more aggressive tilt in positioning because it required a major improvement in demand to catalyze fundamentals and drive price toward higher business values. While we accepted that recovery would not be smooth and that it would take time to deploy vaccines both domestically and globally, we decided that recovery was the logical path of least resistance and we were being well compensated for these risks.”

4. Merck & Co., Inc. (NYSE:MRK)

Number of Hedge Fund Holders: 79  

Merck & Co., Inc. (NYSE:MRK) operates as a healthcare company worldwide. It is one of the top healthcare stocks to invest in. On October 5, the company announced that it had opened a new secondary packaging facility in Singapore to support production of vaccines and biologics including immunotherapies. The firm said that it had also broken ground for a new plant which will produce inhalers. This manufacturing facility is also a part of a $500 million investment project of the firm.

On September 14, Berenberg analyst Luisa Hector upgraded Merck & Co., Inc. (NYSE:MRK) stock to Buy from Hold with a price target of $100, up from $95, noting that the firm offered investors medium-term growth just ahead of the sector average and no litigation overhang. 

Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Merck & Co., Inc. (NYSE:MRK), with 12 million shares worth more than $1.1 billion. 

In its Q2 2022 investor letter, Chartwell Investment Partners, an asset management firm, highlighted a few stocks and Merck & Co., Inc. (NYSE:MRK) was one of them. Here is what the fund said:

“In the Dividend Equity accounts, the three best performers in Q2 includes Merck & Co., Inc. (NYSE:MRK), up 12.0%. Merck, like other pharma companies, is in a defensive business, but the stock also did well as peak-sales estimates for their flagship drug, Keytruda, have gone up (JPMorgan estimates $32 billion in sales by 2026).”

3. Johnson & Johnson (NYSE:JNJ)

Number of Hedge Fund Holders: 83

Johnson & Johnson (NYSE:JNJ) researches and develops, manufactures, and sells various products in the healthcare field. It is one of the premier healthcare stocks to invest in. On October 10, The Janssen, a pharmaceutical company which is a subsidiary of Johnson & Johnson, revealed that more than half of patients who responded to their Sterala ulcerative colitis therapy in a phase 3 trial remained in clinical remission through four years of treatment. 

On July 21, UBS analyst Kevin Caliendo maintained a Neutral rating on Johnson & Johnson (NYSE:JNJ) stock and lowered the price target to $180 from $185, noting that the macro economic slowdown had led to decreasing forward estimates for the firm. 

Among the hedge funds being tracked by Insider Monkey, Florida-based firm GQG Partners is a leading shareholder in Johnson & Johnson (NYSE:JNJ), with 6.6 million shares worth more than $1.2 billion. 

In its Q2 2022 investor letter, Mayar Capital, an asset management firm, highlighted a few stocks and Johnson & Johnson (NYSE:JNJ) was one of them. Here is what the fund said:

“Johnson & Johnson (NYSE:JNJ) is currently our largest position and a long-standing holding. The majority of the group’s sales comes from its collection of pharmaceutical franchises, but a large majority (~45%) comes from its collection of medical device businesses and its consumer brands.

Here’s how JNJ make and spend a dollar of revenues: As of 2021, about 55 cents of that dollar comes from its pharmaceutical sales – sales of drugs to pharmacies and distributors – while 30 cents come from the sale of medical devices, such as surgery equipment and orthopaedics. The rest of that dollar in sales comes from sales of JNJ’s consumer brands such as Listerine mouthwash, Nicorette nicotine tablets and Neutrogena cosmetics (…read more)

2. UnitedHealth Group Incorporated (NYSE:UNH)

Number of Hedge Fund Holders: 91

United Group Incorporated (NYSE:UNH) operates as a diversified healthcare company in the United States. It is one of the major healthcare stocks to invest in. On October 3, the company announced that it had completed the $8 billion purchase of Change Healthcare. The firm had agreed to purchase Change Healthcare for $25.75 per share in January 2021, which was changed to $27.5 per share later. 

On September 22, Raymond James analyst John Ransom maintained a Strong Buy rating on UnitedHealth Group Incorporated (NYSE:UNH) stock and raised the price target to $635 from $620. 

At the end of the second quarter of 2022, 91 hedge funds in the database of Insider Monkey held stakes worth $10.9 billion in United Group Incorporated (NYSE:UNH), compared to 103 in the preceding quarter worth $12.8 billion. 

In its Q2 2022 investor letter, Carillon Tower Advisers, an asset management firm, highlighted a few stocks and United Group Incorporated (NYSE:UNH) was one of them. Here is what the fund said:

“UnitedHealth Group Incorporated (NYSE:UNH) reported solid quarterly results and raised 2022 guidance modestly. Additionally, managed care is another industry that is viewed as defensive in the current environment, which helped support UnitedHealth and its peer group.”

1. Thermo Fisher Scientific Inc. (NYSE:TMO)

Number of Hedge Fund Holders: 93  

Thermo Fisher Scientific Inc. (NYSE:TMO) offers life sciences solutions, analytical instruments, specialty diagnostics, and laboratory products and services worldwide. It is one of the elite healthcare stocks to invest in. On September 20, the company revealed that it had opened a $160 million facility in Chelmsford. The purpose of opening this facility was to produce vaccines and therapies for cancer and other diseases through biological materials. 

On September 12, Barclays analyst Luke Sergott maintained an Overweight rating on Thermo Fisher Scientific Inc. (NYSE:TMO) stock and lowered the price target to $595 from $685. 

At the end of the second quarter of 2022, 93 hedge funds in the database of Insider Monkey held stakes worth $7.8 billion in Thermo Fisher Scientific Inc. (NYSE:TMO), compared to 101 in the preceding quarter worth $7.97 billion. 

In its Q2 2022 investor letter, Stewart Asset Management, an asset management firm, highlighted a few stocks and Thermo Fisher Scientific Inc. (NYSE:TMO) was one of them. Here is what the fund said:

“Recently we initiated two new investments. One in Thermo Fisher Scientific (NYSE:TMO), a supplier to the life sciences industry. We have followed the company for many years and the recent downturn in share price gave us a good entry price at which to invest. Thermo has had strong earnings growth for many years and is led by a superb team. The company’s recent acquisitions make it a full-service supplier to the biopharma and biotech industries.”

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Disclosure. None. Top 10 Healthcare Stocks to Buy is originally published on Insider Monkey.