We recently published a list of the 8 most promising healthcare stocks by hedge funds. In this article, we'll take a look at how Eli Lilly & Company (NYSE:LLY) stands compared to the other most promising healthcare stocks, according to hedge funds.
The healthcare sector relies on advances in medical technology, particularly devices used to prevent, diagnose, and treat diseases. Unlike pharmaceuticals, medical devices work through physical or mechanical means rather than chemical processes. Major products include pacemakers, imaging devices, dialysis machines, and implants.
The healthcare sector is growing in the United States. According to recent estimates, the country's health spending will increase by 7.5% in 2023, outpacing the same year's nominal GDP growth rate. A record 93.1% of Americans now have health insurance, which fueled a surge in health spending last year. The country's national health spending is expected to increase by an average of 5.6% from 2023 to 2032, faster than the projected GDP growth rate of 4.3%.
Moreover, this industry is rapidly growing on a global scale. Healthcare profits are expected to grow at a compound annual growth rate (CAGR) of 7%, from $583 billion in 2022 to more than $800 billion by 2027, according to a recent McKinsey forecast. Although labor shortages and rising inflation continued to weigh on business in 2023, 2024 is expected to be a year of recovery due to a favorable risk-reward environment in the sector. According to the American investment firm, the events of 2023 have created an attractive opportunity for investors to participate in the healthcare industry.
Investment in artificial intelligence (AI) in healthcare has also increased dramatically in recent years, growing twice as fast as IT, according to a study released this month by Silicon Valley Bank. According to the report, companies using AI account for one in every four dollars spent in the healthcare industry. Silicon Valley Bank predicts that more than $11 billion will be spent on the AI healthcare industry this year, with $2.8 billion already invested in 2024.
Investor confidence in the healthcare industry remains high, according to Deloitte's 2024 Global Healthcare Sector Outlook. The industry received $31.5 billion in funding from private equity between 2019 and 2022. The U.S. healthcare sector could save nearly $360 billion over the next five years, thanks to a large number of companies integrating artificial intelligence into their operations. In the near future, AI will likely have a significant impact on healthcare management, diagnosis, treatment, and patient care. Predictive analytics and medical record automation are expected to further improve the effectiveness of healthcare providers and their services.
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In recent months, rising economic uncertainty has prompted a shift toward more defensive stocks, with healthcare emerging as a major beneficiary. The broader market's healthcare sector is up more than 3.6%, with a return of more than 11% over the past year. With this in mind, we take a look at some of the most promising stocks in the healthcare sector.
Our methodology selects the most heavily weighted stocks from the iShares Global Healthcare ETF and ranks them based on the total number of hedge fund holders as of Q3 2024 as tracked in the Insider Monkey database. Ranked.
Why are we interested in stocks that hedge funds invest in? The reason is simple. Our research shows that by mimicking the top stock picks of the best hedge funds, you can outperform the market. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, outperforming the benchmark by 150 percentage points (Learn more ).
The Rise of Eli Lilly (LLY): The New Healthcare Stock for Hedge Funds
A row of pharmaceutical pills with company logos on the bottles.
Number of hedge fund holders: 106
Eli Lilly & Company (NYSE:LLY) is a global pharmaceutical company that develops, manufactures and markets a wide range of pharmaceutical products. Founded in 1876, the company has grown to become one of the world's largest pharmaceutical companies, focusing on areas such as diabetes, oncology, immunology, and neuroscience.
The company is actively working towards strong plans focused on expanding its product range and increasing its production capacity. With recent achievements such as FDA approval of Kisunra for Alzheimer's disease and filings of Tirzepatide for obstructive sleep apnea in the US and EU, the company is focused on tackling important health challenges such as obesity and Alzheimer's disease. There is. Eli Lilly & Company (NYSE:LLY) has 11 new compounds in clinical trials to treat obesity and other chronic diseases and is making significant investments in its pipeline. The company also recently agreed to acquire Morphic Holdings, Inc. to improve its immunology pipeline with oral integrin therapies for the treatment of severe chronic diseases.
Eli Lilly & Company (NYSE:LLY) achieved impressive success in the second quarter of 2024, with revenue up 36% compared to the same period last year. Strong sales of Mounjaro, Zepbound and Verzenio were the main drivers of this expansion. Market demand for these new products and their successful launches increased earnings per share by 68%. As a result of these results, the company has raised its full-year revenue forecast by $3 billion, demonstrating confidence in its future growth trajectory.
Eli Lilly & Company (NYSE:LLY) also announced on October 2 that it has committed $4.5 billion worth of capital to build the Lilly Pharmaceutical Manufacturing Plant. The new facility for drug discovery and advanced manufacturing will be located at the LEAP Research and Innovation District in Lebanon, Indiana. Lilly's unique facility that combines pharmaceutical research and manufacturing in one location allows Lilly to research new production technologies and expand production capacity for clinical trial drugs.
As of Q3 2024, Eli Lilly & Company (NYSE:LLY) was held by 106 hedge funds, according to Insider Monkey's database of over 900 hedge funds. Baron Funds stated the following regarding Eli Lilly & Company in its Q2 2024 Investor Letter, Baron Healthcare Funds:
“Shares of global pharmaceutical company Eli Lilly & Company (NYSE:LLY) rose on continued investor enthusiasm for its diabetes and obesity drug GLP-1. Lilly's Mounjaro/Zepbound not only provides excellent blood sugar control for diabetics, it also provides 20% Lilly promotes greater weight loss and may improve cardiovascular disease outcomes in both diabetic and non-diabetic obese patients, compared with letartortide, which causes about 25% weight loss and about 15% body weight loss. bring about a decrease 1 In the United States alone, there are 32 million people with type 2 diabetes and an additional 105 million obese patients who are eligible for GLP-1 drugs. It is estimated that supply and access will increase in the short term. Despite limited availability, Lilly believes GLP-1 drugs will become the standard of care for both diabetes and obesity, a category worth more than $150 billion, setting a high standard for efficacy and making significant gains over the long term. We believe we will gain market share. With the adoption of GLP-1, we believe Lilly's total revenue will triple by 2030.”
Overall, LLY ranks #2 on hedge funds' list of most promising healthcare stocks. While we see the potential in healthcare companies, we believe AI stocks have a better chance of delivering higher returns faster. If you're looking for AI stocks with more promise than LLY, but trading at less than 5x earnings, check out our report on the cheapest AI stocks.
Read next: 8 Best Widemot Stocks to Buy Now and 30 Most Important AI Stocks, According to BlackRock
Disclosure: None. This article was originally published on Insider Monkey.
