We recently published a list of 10 Best Healthcare Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Pfizer Inc. (NYSE:PFE) stands against the other best healthcare stocks to buy according to hedge funds.
Resilience and Growth in the U.S. Healthcare Sector
Investing in healthcare equities is typically seen as protective during difficult economic times. This is because, even in times of financial hardship, people usually do not reduce their usage of prescription drugs or other necessary healthcare services. The Centers for Medicare and Medicaid Services (CMS) estimates that national healthcare expenditures would grow at an average rate of 5.6% between 2027 and 2032, with spending on healthcare expected to reach an estimated $4.8 trillion in 2023.
In America, the healthcare sector is booming. A new analysis showed that the Country’s healthcare spending rose by 7.5% in 2023, outpacing the nominal GDP growth rate of that year. A significant portion of the population, approximately 93.1% of Americans, had health insurance last year, which helped to drive up healthcare spending. The US government’s predicted 5.6% annual growth in healthcare spending between 2023 and 2032 is expected to surpass the 4.3% growth rate of the GDP.
Navigating Challenges and Opportunities in the Global Healthcare Market
The global healthcare industry is expanding, with McKinsey predicting profits to grow from $583 billion in 2022 to over $800 billion by 2027, at a 7% CAGR. Despite challenges in 2023 from labor shortages and inflation, 2024 is expected to recover, creating an attractive investment opportunity. AI investments in healthcare have surged, with $2.8 billion already invested in 2024 and expectations of over $11 billion by year-end. Deloitte’s 2024 outlook highlights high investor confidence, with AI poised to save $360 billion in U.S. healthcare over the next five years through advancements in patient care, diagnosis, and administration.
In 2023, the healthcare sector faced challenges as investors adjusted for higher interest rates, causing it to lag behind other sectors. However, GLP-1 drugs for weight loss significantly boosted some health companies’ income statements. The sector saw mixed performance, with some companies struggling due to tough comparisons after the COVID-19 vaccine and therapeutic revenues exceeded $100 billion in 2022. Rising interest rates also pressured biotechnology, and providers faced lingering COVID-19 impacts, although distributors improved with better fundamentals and opioid litigation resolutions. However, as fed’s easing of rate policy, with the last cut being that of 50 basis points, the healthcare market is expected to boost.
Our Methodology
For our methodology, we have ranked the best healthcare stocks to buy according to hedge funds based on their total number of hedge fund holders as of Q2 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).”
A medical technician wearing protective gloves and a mask mixing a biopharmaceutical solution.
Pfizer Inc. (NYSE:PFE)
Number of Hedge Fund Holders: 84
Pfizer Inc. (NYSE:PFE) is a global pharmaceutical giant that develops, manufactures, and sells prescription medications, vaccines, and consumer healthcare products. The company’s primary business is creating and distributing drugs to treat various medical conditions, from common ailments to rare diseases.
Pfizer Inc. (NYSE:PFE)’s position in the market for cancer treatments has been greatly strengthened by its recent $43 billion acquisition of Seagen, a biotechnology company that specializes in antibody-drug conjugates (ADCs). It is anticipated that by 2030, this action will improve Pfizer’s oncology portfolio and generate over $10 billion in risk-adjusted revenues.
Pfizer Inc. (NYSE:PFE) reported Q2 2024 revenues of $13.3 billion, reflecting a 3% year-over-year operational growth, its first increase since Q4 2022. Key growth drivers included a 14% revenue increase in its non-COVID portfolio, strong performance in its Oncology division post-Seagen acquisition, and contributions from new product launches. The adjusted earnings per share (EPS) were $0.60, down from the previous year but above analyst estimates, impacted by $1.3 billion in one-time costs. Pfizer faced fluctuations in performance, with 2022 revenues peaking due to COVID-19 sales, followed by a 41% decline in 2023 as demand normalized. However, it achieved 7% operational growth when excluding COVID-19 products and received nine FDA approvals in 2023, which are expected to drive future growth. The company’s ongoing cost optimization efforts aim to save $5.5 billion by 2027.
As of Q2 2024, 84 hedge fund holders we tracked held stakes in the stock with Citadel Investment Group being among the largest stakeholders with 29,590,600 shares worth $827,944,988. Based on the analysis of 18 Wall Street analysts, the stock holds a Moderate Buy rating. Wall Street analysts predict Pfizer’s average 12-month price target at $32.77, with a high of $45.00 and a low of $27.00. This represents an 11.39% increase from the current price of $29.42.
Overall, PFE ranks 5th among the best healthcare stocks to buy according to hedge funds. While we acknowledge the potential of PFE 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 PFE 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.