Gurus Prescribed These Health Care Stocks in the 3rd Quarter

Investors loaded up on these pharmaceutical companies and medical device manufacturers

Author's Avatar
Nov 30, 2022
Summary
  • Despite having the worst performance year to date, gurus are finding opportunities in the health care sector.
  • The most-bought stocks in this space included Johnson & Johnson, Intuitive Surgical, Eli Lilly, Walgreens and AbbVie.
Article's Main Image

Amid rising concerns about the state of the global economy, rising inflation, central bank interest rate hikes and increased Covid-19 restrictions in China, marked indexes were mixed on Wednesday morning.

The Dow Jones Industrial Average lost 226 points, or 0.70%, while the S&P 500 Index declined 0.30%. The Nasdaq Composite increased 0.1%.

1597985168151379968.png

Additionally, the overall health care sector, which has significantly underperformed the S&P 500 Index so far this year, was up 0.30% on Wednesday morning.

1597983071989235712.png

Despite the market’s bearishness toward health care companies, gurus are still finding plenty of value opportunities in the sector. According to GuruFocus’ Hot Picks, a Premium feature based on 13F filings, the health care most-bought by gurus during the third quarter were Johnson & Johnson (

JNJ, Financial), Intuitive Surgical Inc. (ISRG, Financial), Eli Lilly and Co. (LLY, Financial), Walgreens Boots Alliance Inc. (WBA, Financial) and AbbVie Inc. (ABBV, Financial).

Investors should be aware that 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.

Johnson & Johnson

Held by 32 gurus with a combined equity portfolio weight of 53.40%, an equal 14 buys and sells were recorded for Johnson & Johnson (

JNJ, Financial) during the three months ended Sept. 30.

The New Brunswick, New Jersey-based pharmaceutical company, which also makes medical devices and consumer goods, has a $458.55 billion market cap; its shares were trading around $175.20 on Wednesday with a price-earnings ratio of 24.43, a price-book ratio of 6.15 and a price-sales ratio of 4.86.

The GF Value Line suggests the stock is fairly valued currently based on historical ratios, past financial performance and analysts’ future earnings projections.

1597990071464722432.png

The GF Score of 90 out of 100 indicates the company has high outperformance potential, driven by strong ratings for profitability, growth, financial strength and momentum as well as middling marks for GF Value.

1597990598458048512.png

Of the gurus invested in Johnson & Johnson,

Ken Fisher (Trades, Portfolio) has the largest stake with 0.23% of its outstanding shares. Ray Dalio (Trades, Portfolio)’s Bridgewater Associates, Jeremy Grantham (Trades, Portfolio), Yacktman Asset Management (Trades, Portfolio) and several other gurus also have significant holdings.

Intuitive Surgical

Recording 11 buys and five sells for the quarter, 15 gurus are invested in Intuitive Surgical (

ISRG, Financial). The combined weight in their equity portfolios is 7.04%.

The medical devices company headquartered in Sunnyvale, California, which manufactures robotic systems to assist in minimally invasive surgery, has a market cap of $92.66 billion; its shares were trading around $262.10 on Wednesday with a price-earnings ratio of 69.18, a price-book ratio of 8.05 and a price-sales ratio of 15.63.

According to the GF Value Line, the stock is modestly undervalued currently.

1597994083165503488.png

The GF Score of 97 indicates the company has high outperformance potential on the back of strong ranks for all five criteria.

1597995487586254848.png

With a 1.20% stake, Fisher is the company’s largest guru shareholder. Other top guru investors of Intuitive Surgical include

Baillie Gifford (Trades, Portfolio), Dalio’s firm, Grantham, Spiros Segalas (Trades, Portfolio), Ron Baron (Trades, Portfolio), the Eaton Vance Worldwide Health Sciences Fund (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Catherine Wood (Trades, Portfolio).

Eli Lilly

Eli Lilly (

LLY, Financial), which recorded 11 buys and eight sells for the period, is held by 21 gurus with a combined equity portfolio weight of 39.34%.

The Indianapolis-based pharmaceutical company, which focuses on neuroscience, endocrinology, cancer and immunology, has a $345.74 billion market cap; its shares were trading around $363.57 on Wednesday with a price-earnings ratio of 55.38, a price-book ratio of 34.33 and a price-sales ratio of 11.32.

Based on the GF Value Line, the stock appears to be significantly overvalued currently.

1598003924198064128.png

The company is likely to have average performance going forward based on its GF Score of 75. While Eli Lilly received high points for profitability and growth, it got only middling marks for financial strength and low ranks for GF Value and momentum.

1598004168503689216.png

PRIMECAP Management (Trades, Portfolio) is Eli Lilly’s largest guru shareholder with a 2.95% stake. The Vanguard Health Care Fund (Trades, Portfolio), Fisher, Segalas and Simons’ firm also have notable positions in the stock.

Walgreens Boots Alliance

With a combined equity portfolio weight of 6.02%, 12 gurus own Walgreens Boots Alliance (

WBA, Financial) currently. Ten buys and three sells were recorded during the third quarter.

The retail pharmacy chain operator, which is headquartered in Deerfield, Illinois, has a market cap of $35.31 billion; its shares were trading around $40.83 on Wednesday with a price-earnings ratio of 8.17, a price-book ratio of 1.40 and a price-sales ratio of 0.27.

The GF Value Line suggests the stock is modestly undervalued currently.

1598009758353293312.png

The GF Score of 80 indicates the company is likely to have average performance going forward. While ratings for profitability and GF Value were high, Walgreens recorded middling marks for growth, financial strength and momentum.

1598009827806773248.png

Of the gurus invested in Walgreens, Simons’ firm has the largest stake with 0.30% of its outstanding shares.

John Rogers (Trades, Portfolio), Grantham, Dalio’s firm, Robert Olstein (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio) are other notable guru shareholders.

AbbVie

Having recorded 10 buys and five sells during the quarter, AbbVie (

ABBV, Financial) is held by 19 gurus with a combined equity portfolio weight of 19.82%.

The Chicago-based biotech company has a $284.44 billion market cap; its shares were trading around $160.54 on Wednesday with a price-earnings ratio of 21.47, a price-book ratio of 17.79 and a price-sales ratio of 4.96.

According to the GF Value Line, the stock is modestly overvalued currently.

1598064251132542976.png

Further, the GF Score of 89 indicates the company has good outperformance potential. While the ratings for profitability and growth were high, it raked in middling marks for momentum and financial strength and a low GF Value rank.

1598064394951032832.png

The T. Rowe Price Equity Income Fund is one of AbbVie’s largest guru shareholders. Other gurus who currently own the stock include

John Hussman (Trades, Portfolio), Fisher, Jeff Auxier (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Caxton Associates (Trades, Portfolio), Bernard Horn (Trades, Portfolio), Simons’ firm and Gabelli.

Other popular picks

Additional health care companies popular among gurus as of Sept. 30 included Edwards Lifesciences Corp. (

EW, Financial), Merck & Co. Inc. (MRK, Financial), UnitedHealth Group Inc. (UNH, Financial), Baxter International Inc. (BAX, Financial) and Pfizer Inc. (PFE, Financial).

Also check out:

Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure
Rating:
0 / 5 (0 votes)
Author's Avatar
WRITTEN BY

Request A Demo

Learn more about GuruFocus' key features, including All-In-One Screener, backtesting, 30-year financial, stock summary page, guru trades, insider trades, excel Add-in, google sheets and much more.

GuruFocus Screeners

Related Articles