We recently published a list of the 10 best healthcare stocks for long-term investments. In this article, we'll look at where Abbott Laboratories (NYSE: ABT) stands up against other best medical stocks for long-term investments.
Medical expenses and costs are rising in the US. According to the Centers for Medicare and Medicaid Services, US healthcare costs rose 7.5% to $4.9 trillion between 2022 and 2023. In 2023, the healthcare industry accounted for around 17.6% of the US economy, up 17.4% from 2022.
The impact of tariffs on this ongoing trend has become a major competitive topic in the healthcare sector, as more and more US companies rely on China for transactions on the next promising molecule, whether in the obesity or cancer sector. According to Rizzuto, managing director of Versant Ventures, Carlo Rizzuto spoke about the impact of tariffs on healthcare on CNBC's “fast money” on February 7th. This is the first product developed in China and introduced in the US or other markets. This sector needs to see how tariffs are set up in the market to understand how these trade operations will affect.
Second, and more specifically, the US healthcare industry uses China as a huge hub for contract production and research. As a result, something that increases that cost will probably make the market even more difficult. Increased costs will not improve operations in the health sector, which is already facing investor pressure.
Speaking about China's major impact on the pharmaceutical and medical industry, Rizzuto said that the majority of medical institutions use Chinese CROs or manufacturing partners in some capacity during the research and development stage. As a result, it plays a key role in the way biotechnology and pharmaceutical companies work in the country. From the smallest to the biggest, this pattern is very common.
Simply put, the US lacks the infrastructure to handle transfers, so healthcare companies cannot reissue all of their externalized R&D and production to the country. Therefore, it is extremely difficult to understand how such a large reuse occurs. Once the amount of tariffs is applied, the cost to achieve this outcome can be calculated linearly.
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According to McKinsey, Healthcare EBITDA is projected to rise from a baseline of $676 billion in 2023 to $987 billion at 7% CAGR in 2028. Recovery from post-pandemic lows is expected to support improvements in some segments, but growth is expected to be faster in other areas (such as specialized pharmacies and HST). Software platforms are essential to the healthcare ecosystem as they allow payers and providers to operate more effectively in complex settings.
By automating processes, enhancing data connectivity and generating actionable insights, technological innovation (such as generator AI and machine learning) can open doors for stakeholders across all segments. McKinsey went on to say that increased utilization rates and pipeline expansion (like cancer) are projected to drive significant growth in revenues for specialty pharmacies. The profit pool of specialty pharmacies is still growing as a result of the increased use of specialty medicines.
Our methodology uses Finviz Screener to select stocks with market capitalizations of over 2 billion, annual returns of over 10%, and low PE ratios for those under 20 years of age.
Why are hedge funds interested in the stocks they accumulate? The reason is simple. Our research shows that mimic the top stock picks of the best hedge funds can outperform the market. The quarterly newsletter strategy has chosen 14 small and large caps per quarter, returning 373.4% since May 2014, surpassing the benchmark by 218 percentage points (see more here).
Is Abbott Laboratories (ABT) the best medical stock for long-term investments?
An operating room with a doctor monitoring a patient's vital signs during surgery using medical equipment.
Number of hedge fund holders: 66
Abbott Laboratories (NYSE: ABT) stands second among the best medical stocks for long-term investments. Discover, develop, manufacture and sell healthcare products. Medical devices, established drugs, diagnostic products, and nutritional products are part of the company's business segment. The complex range of popular pharmaceutical products of the brand is sold internationally by its established pharmaceutical sector. The Medical Devices Division oversees the global sales of products related to electrophysiology, neuroregulation, structural heart, heart failure, rhythm management and diabetes care.
Some growth potential has been highlighted by major businesses at Abbott Laboratories (NYSE: ABT). One of the company's biggest growth engines is the freestyle ribble franchise in the diabetes care segment, which includes a variety of continuous glucose monitoring (CGM) devices. It could increase market share. As the global population goes on, the company's cardiovascular devices (including its structural cardiac portfolio) can also contribute to long-term growth.
The business generated $8.5 billion in operating cash flow in the fourth quarter of 2024. It funded capacity expansion, paid off debt, returned $5 billion to shareholders with dividends, and repurchased shares. With organic sales growth rates ranging from 7.5% to 8.5%, Abbott Laboratories (NYSE: ABT) is well positioned to bring about strong growth in 2025. There is a competitive advantage in the market due to creative skills, various business and industry knowledge.
Overall, ABT ranks second in the list of the best healthcare stocks for long-term investments. We acknowledge the potential of healthcare companies, but our belief lies in the belief that AI stocks offer higher returns and hold a greater commitment to doing it within a shorter time frame. If you're looking for AI stocks that are more promising than ABT but are trading at less than five times the revenue, check out our report on the cheapest AI stocks.
Read next: According to the billionaire, the best AI stocks to buy now and the best best stocks to buy now
Disclosure: None. This article was originally published on Insider Monkey.
