We recently compiled a list of the 10 Best Healthcare Stocks to Buy Under $50. In this article, we are going to take a look at where Walgreens Boots Alliance, Inc. (NASDAQ:WBA) stands against the other healthcare stocks under $50. If interested, you can also read our recent article on the 10 Best Healthcare Stocks To Buy According to Hedge Funds.
According to Michael Adams, the Lead Editor of Investing at Forbes, investments in healthcare stocks provide investors with consistent and steady returns because of the defensive nature of these stocks. No matter what the economic situation or direction of the stock market, people will always need healthcare and medical services.
The healthcare industry is thriving in the United States. A recent report highlighted a 7.5% increase in healthcare spending in the country in 2023, which was higher than the nominal GDP growth rate during the same year. The percentage of Americans with health insurance reached a record high of 93.1%, contributing to the high growth in healthcare expenditure last year. Between 2023 and 2032, the national healthcare spending in the United States is projected to grow at an average of 5.6% and outpace the GDP growth which is forecast at 4.3%.
The industry is steadily expanding globally as well. Recent predictions by McKinsey anticipate healthcare profits to grow from $583 billion in 2022 to a total of over $800 billion by 2027, at a CAGR of 7%. While the industry remained under pressure in 2023 due to labor shortages and high inflation rates, 2024 is poised to be a year of recovery due to a favorable risk-reward environment in the industry. The American investment firm believes that the events of 2023 have created an attractive opening for investors to spend in the healthcare sector.
Investments in artificial intelligence (AI) in healthcare have also surged over the last few years, growing at twice the pace of the tech industry, according to a report released by the Silicon Valley Bank this month. The story also stated that one in every four dollars spent in the healthcare sector goes to companies that are leveraging artificial intelligence. Already, an estimated $2.8 billion has been invested in AI healthcare corporations in 2024, with the Silicon Valley Bank expecting over $11 billion to be deployed in the sector this year.
Deloitte’s 2024 Global Health Care Sector Outlook has also mentioned that investor confidence in the healthcare sector remains high. Between 2019 and 2022, private equity funding worth $31.5 billion was invested in the sector. A large number of companies are incorporating artificial intelligence into their operations in the United States which has the potential to save around $360 billion in the country’s healthcare industry over the next five years. AI is likely to play a significant role in the foreseeable future in patient care, diagnosis, treatment, and medical administration. The automation of health records and the use of predictive analytics are set to further enhance the efficiency of healthcare providers and their services.
If you have made up your mind to invest in the healthcare sector and want to start small, stay with us as we shift our focus now to the best healthcare stocks to buy under $50.
Methodology
We went through the stock screeners for NASDAQ and NYSE to find healthcare stocks that had a current share price of less than $50 and then looked up those stocks on Insider Monkey’s database of 920 hedge funds as of Q1 2024. The stocks are ranked in ascending order of number of hedge fund holders in each company.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A pharmacist discussing the health benefits of a prescription medication with a customer.
Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
Number of Hedge Fund Holders: 41
Share Price: $15.66
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) has had a difficult past year, with its share price declining 52% during the year. In fact, it has been a tough decade, with the company’s share losing 75% of its value over the last 10 years. The company has been greatly hurt by reimbursement pressures in the industry as pharmacy benefit management companies (PBMs) push to bring down reimbursement rates related to health insurance customers.
That said, investors remain confident about the company turning things around amid measures taken by the incumbent management. According to Insider Monkey, 41 hedge fund holders remain optimistic about the company. Ariel Appreciation Fund shared the following remarks about Walgreens Boots Alliance, Inc. (NASDAQ:WBA) in its first quarter 2024 investor letter:
Shares of retail drugstore operator, Walgreens Boots Alliance, Inc. (NASDAQ:WBA), declined over the period as challenging consumer and macroeconomic conditions, ongoing operational issues and a significant cut in the dividend weighed on shares. To address these performance lows, WBA’s new CEO is rebuilding the company’s management team with leaders who have significant experience in healthcare services. Meanwhile, WBA continues to execute on its cost-savings initiatives to optimize profitability and is using excess capital to prioritize the sustainability of its operations and balance sheet. Over the medium term, we expect a re-rating in shares as the new executive team earns credibility, margins, and free cash flow shows signs of improvement and the company deleverages. WBA shares are currently trading at a significant discount to our estimate of private market value.
Overall WBA ranks 6th on our list of the best healthcare stocks to buy under $50. You can visit 10 Best Healthcare Stocks to Buy Under $50 to see the other healthcare stocks that are on hedge funds’ radar. While we acknowledge the potential of WBA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than WBA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.