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Tagged: hedge fund

12 Best Medical Stocks to Buy Under $10

In this article, we will take a look at the 12 best medical stocks to buy under $10. To skip our analysis of the latest trends, and market activity, you can go directly to see the 5 Best Medical Stocks to Buy Under $10.

The healthcare sector spans medical stocks including biotechnology companies, health insurance services providers, medical care facilities operators, drug manufacturers, and medical devices companies, among others. The sector includes companies with market capitalizations ranging from several million dollars to hundreds of billion dollars. The components of the sector include companies with varying market capitalization and these companies are at different stages of their business cycles.

For instance, healthcare industry bigwigs like Pfizer Inc. (NYSE:PFE), Eli Lilly and Company (NYSE:LLY), Johnson & Johnson (NYSE:JNJ), and Merck & Co., Inc. (NYSE:MRK) benefit from diversification as they operate across several market segments with plenty of products. On the other hand, there is a large number of medical companies that focus on specific medical areas such as biotechnology or medical devices, and typically specialize in a specific niche. An example would be UniQure N.V. (NASDAQ:QURE), a small-cap medical company focused on gene therapies for genetic diseases.

An important factor for small medical companies focused on niche areas is the M&A activity. These companies are picked by bigger players for attractive premiums once they make significant breakthroughs. The M&A activity in the biotech industry, a major industry in the healthcare sector, picked up pace once again in 2023 after a dismal performance in 2022. It has been a relatively strong year for the pharmaceutical and life sciences sectors with both deal value and volume of M&A close to pre-pandemic levels, according to PwC’s latest analysis. These sectors combined registered $222 billion worth of M&A deals during the twelve months ended November

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Warren Buffett never mentions this but he is one of the first hedge fund managers who unlocked the secrets of successful stock market investing. He launched his hedge fund in 1956 with $105,100 in seed capital. Back then they weren’t called hedge funds, they were called “partnerships”. Warren Buffett took 25% of all returns in excess of 6 percent. 

For example S&P 500 Index returned 43.4% in 1958. If Warren Buffett’s hedge fund didn’t generate any outperformance (i.e. secretly invested like a closet index fund), Warren Buffett would have pocketed a quarter of the 37.4% excess return. That would have been 9.35% in hedge fund “fees”. 

Actually Warren Buffett failed to beat the S&P 500 Index in 1958, returned only 40.9% and pocketed 8.7 percentage of it as “fees”. His investors didn’t mind that he underperformed the market in 1958 because he beat the market by a large margin in 1957. That year Buffett’s hedge fund returned 10.4% and Buffett took only 1.1 percentage points of that as “fees”. S&P 500 Index lost 10.8% in 1957, so Buffett’s investors actually thrilled to beat the market by 20.1 percentage points in 1957.

Between 1957 and 1966 Warren Buffett’s hedge fund returned 23.5% annually after deducting Warren Buffett’s 5.5 percentage point annual fees. S&P 500 Index generated an average annual compounded return of only 9.2% during the same 10-year period. An investor who invested $10,000 in Warren Buffett’s hedge fund at the beginning of 1957 saw his capital turn into $103,000 before fees and $64,100 after fees (this means Warren Buffett made more than $36,000 in fees from this investor).

As you can guess, Warren Buffett’s #1 wealth building strategy is to generate high returns in the 20% to 30% range.

We see several investors trying to strike it rich in options

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