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We keep eyes on hedge fund managers as they’re among the smartest investors around. They have the incentives and resources to analyze stocks in-depth, uncover non-public information, and make informed decisions about stocks. Our research has shown that outsiders can beat the market by imitating the top stock picks of successful hedge funds.

In this article we will focus on medical instruments and supplies stocks that hedge funds love the most. We compiled six stocks in a list below. Each of them has more than a $10 billion market cap, and was held by more than 30 hedge funds in the third quarter.

Company

Ticker

No. of hedge fund

Covidien PLC

COV

34

Thermo Fisher Scientific Inc.

TMO

34

Baxter International Inc.

BAX

33

CareFusion Corp

CFN

31

Medtronic, Inc.

KCI

31

Kinetic Concepts Inc.

MDT

31

Covidien PLC provides healthcare products for clinical and home settings. COV is breaking even so far in 2011. The stock has a market cap of $21.28 billion. It trades at a 10.35 forward PE and an 11% expected EPS growth rate. In addition, it has a dividend yield of 2.1%. COV was owned by 34 hedge funds at the end of September. Robert Rodriguez and Steven Romick’s First Pacific Advisors had 4.76 million shares and was COV’s largest hedge fund stakeholder at that time. John Paulson’s Paulson & Co initiated a new position in COV with 2.04 million shares (see Paulson’s top picks).

Thermo Fisher Scientific Inc. (NYSE:TMO) provides analytical hardware and software to users. The company has a $16.81 billion market cap. TMO has lost 19% year to date. The stock trades at a 10.87 forward PE and a 12.47% expected EPS growth rate. TMO was in 34 hedge funds in the third quarter. John Griffin, Boykin Curry and Larry Robbins were bullish about TMO. They all increased their positions during the third quarter and each took more than 4 million shares in the stock.

Baxter International Inc. (NYSE:BAX) is a diversified healthcare company which provides various medical products. BAX has a market cap of $27.86 billion and has slightly lost 1% year to date. The stock has a forward PE of 11.38, and its EPS is expected to grow at 10%. The stock also has a dividend yield of 2.8%. Thirty three hedge funds took BAX in their portfolios during the third quarter. John Paulson took the largest portion among these hedge funds, with 6.22 million shares. Steven Cohen was also bullish about BAX. SAC Capital Advisors boosted its position by more than 36 times (check out Steve Cohen’s top picks).

CareFusion Corp (NYSE:CFN) is a medical technology company. It has a market cap of $5.52 billion. The stock has lost 5% year to date. Currently CFN is trading at a forward PE of 13.38. Its EPS is expected to grow by 13% annually in the next five years. Thirty one hedge funds held CFN in the third quarter. David Einhorn’s Greenlight Capital had more shares in CFN than any other hedge fund. The firm increased its position by 34% and had 12.80 million shares at the end of September. Lee Ainslie, Richard Blum, Paul Tudor Jones and Malcolm Fairbairn initiated brand-new positions in CFN during the third quarter.

Kinetic Concepts Inc. (NYSE:KCI) was in 31 hedge funds’ positions in the third quarter. John Paulson, Matthew Halbower, Israel Englander and Steven Cohen were among KCI’s stakeholders.

Medtronic, Inc. (NYSE:MDT) provides device-based medical therapies. MDT has a $38.74 market cap. The stock currently trades at a 10.47 forward PE and an 8% expected EPS growth rate. MDT has a 2.8% dividend yield. In the third quarter, Ken Fisher was the largest stakeholder among 31 hedge funds that took MDT in their portfolios. His Fisher Asset Management retained 8.76 million shares in MDT at the end of September. Bill Miller, D. E. Shaw and Ray Dalio were bullish about the stock and significantly boosted their position during the third quarter (see billionaire Ray Dalio’s 13F portfolio).

Source: 6 Medical Instruments And Supplies Stocks That Hedge Funds Love