We recently published a list of 8 Most Promising Healthcare Stocks According to Hedge Funds. In this article, we’ll take a look at where Johnson & Johnson (NYSE:JNJ) stacks up against the other top healthcare stocks according to hedge funds.
The healthcare sector depends on advancements in medical technology, particularly devices used in the prevention, diagnosis and treatment of diseases. Unlike pharmaceuticals, medical devices operate through physical or mechanical means rather than chemical processes. Key products include pacemakers, imaging equipment, dialysis machines and implants.
In the United States, the healthcare sector is thriving. According to a recent estimate, the country’s health spending increased by 7.5% in 2023, a growth rate higher than the growth rate of nominal GDP in the same year. A record 93.1% of Americans now have health insurance, which helped fuel last year’s surge in health care spending. The country’s national health spending is expected to increase at an average rate of 5.6% between 2023 and 2032, higher than the 4.3% growth forecast for GDP.
Additionally, the industry is growing rapidly globally. According to recent McKinsey projections, healthcare sector profits would increase at a compound annual growth rate (CAGR) of 7%, from $583 billion in 2022 to more than $800 billion in 2027. Although As labor shortages and rising inflation rates continue to put pressure on the company in 2023, a good risk-reward climate in the sector is expected to make 2024 a year of recovery. According to the American investment company, the events of 2023 have presented an attractive opportunity for investors to engage in the healthcare sector.
According to a study released this month by Silicon Valley Bank, investments in artificial intelligence (AI) in the healthcare sector have also increased dramatically in recent years, growing at a rate twice as fast as the IT sector. According to the report, companies using AI account for one in four dollars spent in the healthcare sector. Silicon Valley Bank predicts that more than $11 billion will be spent on AI healthcare this year, with around $2.8 billion already invested in 2024.
Investor confidence in the healthcare sector remains high, according to Deloitte’s 2024 Global Healthcare Sector Outlook. The industry received $31.5 billion in private equity funding between 2019 and 2022. Over the next five years, the U.S. healthcare sector could save nearly $360 billion through many companies integrating artificial intelligence into their operations. Before long, AI will likely have a significant impact on medical administration, diagnosis, treatment and patient care. Predictive analytics and automation of health records are expected to further improve the efficiency of healthcare providers and their offerings.
In recent months, growing economic uncertainty has prompted a shift towards more defensive stocks, with the healthcare sector emerging as one of the main beneficiaries. The healthcare sector in the market as a whole has surged over 3.6% and over the past year has returned over 11%. With this in mind, we’ll look at some of the most promising stocks in the healthcare sector.
For our methodology, we selected the top-weighted stocks from the iShares Global Healthcare ETF and then ranked them based on their total number of hedge fund holders as of Q3 2024, as tracked by the Insider Monkey database .
Why are we interested in stocks that hedge funds are piling into? The reason is simple: our research has shown that we can outperform the market by imitating the stocks selected by the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Hedge Funds Bet Big on Johnson & Johnson (JNJ): Top Healthcare Stocks to Watch
A smiling baby with a range of childcare products in the foreground.
Number of hedge fund holders: 81
Johnson & Johnson (NYSE: JNJ) is a global healthcare giant that operates in three main segments: pharmaceuticals, medical devices and consumer health products. The company develops and manufactures a wide range of products, from everyday items like bandages and Tylenol to advanced medical devices and innovative prescription medications.
Regulatory approvals for RYBREVANT and TREMFYA have been acquired by Johnson & Johnson (NYSE: JNJ). The company strengthened its position in cardiovascular intervention and medical technology by acquiring Shockwave Medical in April. It is expected that all segments will experience a compound annual growth rate of 5-7% between 2025 and 2030. Additionally, there are around ten assets in the innovative medicine sector that could each generate over $5 billion. dollars of expected operational sales.
Johnson & Johnson (NYSE: JNJ) is a major dividend payer, having increased its distributions for more than 60 consecutive years. The company offers a quarterly dividend of $1.24 per share for a dividend yield of over 3%.
As of the third quarter of 2024, 81 hedge funds tracked by Insider Monkey held stakes in Johnson & Johnson (NYSE: JNJ) with Fisher Asset Management being the largest shareholder with stakes worth over $1.2 billion.
Overall, JNJ ranks 4th on our list of the most promising healthcare stocks according to hedge funds. While we recognize the potential of healthcare companies, our belief lies in the belief that AI stocks hold more promise in terms of higher returns and in a shorter time frame. If you’re looking for an AI stock that’s more promising than JNJ but is trading at less than 5x earnings, check out our report oncheapest AI stock.
