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In the US, healthcare costs and prices have been increasing. According to the Centers for Medicare & Medicaid Services, U.S. healthcare spending increased 7.5% from 2022 to $4.9 trillion in 2023. In 2023, the healthcare industry made up 17.6% of the US economy, an increase of 17.4% from 2022. The growth of Medicare and private health insurance is the two leading causes of this increase.
The impact of tariffs on this continuing trend has become a significant bone of contention in the healthcare industry as more and more US corporations turn to China for agreements on the next breakthrough chemical, whether in the areas of obesity or cancer. Carlo Rizzuto, managing director of Versant Ventures, spoke on CNBC’s “Fast Money” on February 7 about the impact of tariffs on healthcare. Rizzuto says that tariffs may impact the sector in two ways. Products made in China and sold in the US or other countries would be the first. The industry would need to watch how the tariffs are used in the market to comprehend how they would impact such trade operations.
Second, and more precisely, the US healthcare industry relies heavily on China as a basis for contract production and research. Consequently, anything that raises that price is probably going to make the market more difficult. Cost hikes won’t help the healthcare industry’s management, which is already under pressure from investors.
Speaking on China’s enormous impact in the pharmaceutical and healthcare sectors, Rizzuto said that the vast majority of healthcare companies use a Chinese CRO or manufacturing partner in some capacity during the research and development phase. As a result, it significantly affects how the nation’s biotech and pharmaceutical industries function. This trend is rather common in businesses of all sizes.
In other words, the lack of infrastructure to facilitate the transfer prevents healthcare corporations from reshoring all of their externalized R&D and production to the United States. Therefore, it is hard to imagine how such a large-scale reshoring might occur. The amount of tariffs imposed can be used to determine the expenses of achieving this objective linearly.
According to McKinsey, healthcare EBITDA will rise from a starting point of $676 billion in 2023 to $987 billion in 2028 at a 7% CAGR. Recovery from post-pandemic lows is anticipated to spur progress in several areas, even though development is anticipated to be faster in some (such as specialized pharmacy and HST). Software platforms are essential to the healthcare ecosystem because they let payers and providers operate more effectively in a complex environment.
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By automating procedures, fostering data connectivity, and producing actionable insights, technological innovation (such as generative AI and machine learning) keeps providing opportunities for stakeholders from all industries. McKinsey predicts that increased utilization and pipeline expansion (as in cancer) will result in a considerable increase in specialty pharmacy income. Specialty pharmacy profit pools are continuing to grow as a result of the rise in the use of specialty medications.
For this article, we began by screening the top holdings of the iShares U.S. Healthcare ETF (IYH) to focus on prominent companies within the U.S. healthcare sector. From this list, we selected the top 10 holdings based on their weight in the ETF portfolio. We then ranked these stocks according to the number of hedge funds holding positions in each company as of Q4 2024, based on data from Insider Monkey’s hedge fund tracking database.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Jim Cramer: Johnson & Johnson (JNJ) Is a “Great American Company with a AAA Balance Sheet”
A smiling baby with an array of baby care products in the foreground.
Number of Hedge Fund Holders: 98
Johnson & Johnson (NYSE:JNJ) develops, manufactures, and sells a range of products in the healthcare field through its subsidiaries. The business is divided into two segments: Innovative Medicine and MedTech, with a primary focus on goods about human health and well-being. Infectious diseases, immunology, neuroscience, metabolic and cardiovascular disorders, pulmonary hypertension, and oncology are among the therapeutic specialties covered by its Innovative Medicine division. A wide variety of medical devices and products utilized in the domains of cardiovascular intervention, orthopedics, interventional solutions, surgery, and vision are included in the MedTech section.
The foundation of Johnson & Johnson (NYSE:JNJ) is solid. For fiscal year 2024, it recorded sales of $88.8 billion, a 4.3% increase over the previous year. The company’s high-growth strategy is reflected in these impressive outcomes. Its cash flow from operations is sufficient to pay its high-yielding dividend, and its financial sheet is sound.
The corporation announced on January 13 that it will acquire neurological medication manufacturer IntraCellular for $14.6 billion. Through this acquisition, the business will have access to Caplyta, an oral medication used to treat schizophrenia and bipolar disorder.
Asad Haider, an analyst at Goldman Sachs, returned to coverage of Johnson & Johnson (NYSE:JNJ) on April 9 with a Buy rating and a $172.00 price target. Morgan Stanley maintained its Equal Weight rating on the company’s shares while increasing its price objective from $163 to $164.
Overall JNJ ranks 4th among the innovative healthcare stocks to watch in 2025. 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. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. 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 this cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
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