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 Johnson & Johnson (NYSE:JNJ) 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 smiling baby with an array of baby care products in the foreground.
Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 80
Johnson & Johnson (NYSE:JNJ), founded in 1886, is a multinational corporation known for its extensive range of healthcare products. The company operates through three main segments: pharmaceuticals, medical devices, and consumer health products. It produces a wide array of well-known brands such as Band-Aid, Tylenol, and Listerine, and its products are sold to hospitals, healthcare professionals, and consumers worldwide.
Johnson & Johnson (NYSE:JNJ)’s commitment to innovation and health equity is a significant catalyst for growth. The company’s initiatives like the Health Equity Innovation Challenge aim to address racial health gaps and improve access to healthcare, which positions J&J as a leader in social responsibility while opening new markets. Additionally, J&J’s support for the National Academy of Medicine’s Catalyst Award Competition reflects its dedication to fostering innovative ideas that could enhance the human health span which drives long-term growth in emerging healthcare sectors.
In Q2 2024, Johnson & Johnson (NYSE:JNJ) reported sales of $22.4 billion, a 4.3% increase. The company achieved regulatory successes and expanded its biotechnology footprint by acquiring Shockwave Medical, enhancing its position in cardiovascular intervention. The MedTech segment generated $8 billion in sales, up 4.4% year-over-year. Analysts view J&J as a promising investment, projecting over 20 novel therapies and 50 product expansions by 2030, with expected segment growth of 5% to 7% CAGR. The 12-month price target is $170, indicating a 2% upside. J&J was held by 80 hedge funds at the end of Q2 2024, with Fisher Asset Management as the largest shareholder from the funds we tracked with shares worth $1.02 billion.
Overall, JNJ ranks 8th among the best healthcare stocks to buy according to hedge funds. While we acknowledge the potential of JNJ 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 JNJ 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.