We recently published a list of 15 Small-Cap Healthcare Stocks Hedge Funds Are Buying. In this article, we are going to take a look at where Universal Health Services, Inc. (NYSE:UHS) stands against other small-cap healthcare stocks hedge funds are buying.
The U.S. healthcare sector has performed better in 2025 compared to the broader market. After two years of weak performance, the healthcare sector kicked off on a strong note in 2025. In a letter from Federated Hermes, within the S&P 500, the healthcare sector soared nearly 2.59% as of April 30. Whereas the Information Technology sector reported an 11.24% loss, the Consumer Discretionary sector was down 14.08%, and the S&P 500 recorded a 4.92% decline as a whole.
READ ALSO: Why These 15 Healthcare Stocks Are Surging in 2025
As inflation eases, things will be better economically for the healthcare sector. The Investment Director of Federated Hermes, Jordan Stuart, mentioned that when inflation has eased historically, healthcare stocks have performed better. Stuart added:
“Typically, healthcare stocks underperform when inflation is high due to increased costs and pricing pressures. However, inflation has, ever so slowly, begun to decline again, and optimism around rate cuts has resurfaced, giving life back to healthcare stocks. This shift in economic conditions will likely enhance the attractiveness of health care investments, as lower inflation and interest rates create a more favourable environment for growth and profitability.”
According to BlackRock, an average of 75% of healthcare companies exceeded earnings expectations in the first three quarters of 2024. This led to an improved local investor sentiment, with nearly $80 million of inflows to the iShares Global Healthcare ETF (IXJ) in 2024. BlackRock expects the 2025 projected earnings in the healthcare sector to rebound even further, recording the highest year-over-year growth in 18 years, excluding the COVID-19 period.
The U.S. Healthcare Sector Outlook and Tariff Impact
The U.S. healthcare sector now accounts for a fifth of the U.S. economy. With digital transformation, non-acute care shifts, and innovation in biosimilars and speciality drugs, the healthcare sector remains poised for growth in 2025. According to SNS Insider Research, the healthcare market is expected to reach $44.76 trillion in 2032 from $21.22 trillion reported in 2023. This marks a CAGR of 9.07% between 2024 and 2032. North America accounts for almost 44% of the global healthcare market share.
Trump’s tariffs remain a major hurdle for healthcare, and they may threaten around a 10-15% cost increase for drugs and medical devices, as per Forbes. According to the Medical Device Network, around 69% of the U.S.-marketed medical devices are manufactured outside of the U.S.
David Risinger from Leerink Partners highlighted that potential tariffs would likely drive the U.S. drug prices, even though the companies moved their production to the U.S. Reducing costs with domestic production could take years, added Risinger. Reportedly, President Trump is expected to sign an executive order to slash U.S. prescription drug prices. The President plans to match drug prices overseas and control the price hike anticipated by analysts.
Lately, the U.S. government has been striving to make trade deals with its partners. After talks between the U.S. and China, both countries have decided to slash tariffs for 90 days, with duties set to drop by 115 percentage points. This move will drop American tariffs on Chinese goods to as low as 30%, and China’s retaliatory duties will go down from 125% to 10%.
Our Methodology
To compile the list of the 15 small-cap healthcare stocks hedge funds are buying, we used the Finviz screener to shortlist healthcare stocks that are trading at a market cap of at least $10 billion. For this article, we are defining small-cap stocks as those that trade between $10 billion and $20 billion. We have ranked the stocks in ascending order of the number of hedge fund holders. Data for the number of hedge fund investors for each stock was taken from Insider Monkey’s database, updated as of Q4 2024. In cases where two or more stocks were held by an equal number of hedge funds, we used the upside potential as a tiebreaker. The analysts’ upside potential data is taken from CNN. Please note that the data was collected on May 13, 2025.
Why are we interested in the stocks that hedge funds and billionaire investors 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 doctor speaking with a patient in a hospital bed in an exam room.
Universal Health Services, Inc. (NYSE:UHS)
No. of Hedge Fund Holders: 49
Market Capitalization: $12.56 Billion
Analyst Upside: 14.10%
Universal Health Services, Inc. (NYSE:UHS) is a holding company that operates through its subsidiaries and its management company. The company owns and operates acute care hospitals, outpatient facilities, and behavioural healthcare facilities. The company’s segments include acute care hospital services, behavioural health care services, and Others. Universal Health Services has over 359 inpatient facilities, and 60 outpatient and other facilities in the U.S., the U.K., and Puerto Rico.
Universal Health Services, Inc. (NYSE:UHS) recently reported its first-quarter earnings and revenue. The company posted $4.10 billion in revenues, up by 6.70% year-over-year and slightly missing the estimates. The company posted adjusted earnings of $4.84, surpassing estimates by $0.49 per share. Same facility net revenues in the acute care hospital segment soared over 5% year-over-year. UHS saw a 21% rise in EBITDA from a year ago, excluding Medicaid supplement payments. Moreover, West Henderson Hospital in Las Vegas opened in late 2024, adding to the EBITDA in Q1.
Recently, Jason Cassorla from Guggenheim initiated coverage of the stock with a Buy rating and a price target of $208. The analyst mentions UHS’ position to benefit from its strong acute care hospital footprint, which is anticipated to lead to top-line growth compared to its competitors. Moreover, the growing demand for behavioural and mental health services is expected to be a positive driver for the company.
Overall, UHS ranks 12th on our list of small-cap healthcare stocks hedge funds are buying. While we acknowledge the potential of UHS to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that has gone up since the beginning of 2025, while popular AI stocks have lost around 25%. If you are looking for an AI stock that is more promising than UHS but that trades at less than 5 times its earnings, check out our report about this 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.
