Health care is a market, just like everything else, and that means users face high costs because demand – especially for cutting-edge treatment – greatly outpaces supply. That can have serious consequences for individual consumers but for investors, competition can also come with significant profits.
If you’re looking to diversify or increase your investments in the health care sector, these four stocks are all primed for growth. Even if you don’t want to face rising health care costs on a practical level, as an investor you need to go where the money is.
Long-term care for a portfolio boost
As the need for more long-term care facilities grows with our aging population, providers are on the brink of serious growth, but where do you start? One strong contender is Genesis Healthcare Inc. (GEN, Financial), which is currently ranked by Wall Street Analysts as a hold. For those interested in getting in on a new opportunity, though, Genesis Healthcare Inc. is trading at the fairly low price of $1.43, but still up more than 74% over the 50 day low as of April 10.
Overall, Genesis Healthcare is slightly less volatile than the stock market as a whole, so take the hold advisory seriously. Though many active investors are focusing on Genesis Healthcare for quick turnover trades, you can certainly play it either way.
Big money in drug innovation
If you’re looking for more excitement than Genesis Healthcare can offer, then you need to go where the innovations are – to the drug and medical device companies. Be prepared to lay out big money, though. As of April 3, Amgen Inc. was trading at $166 a share, with major profits over the last 12 months, making most insiders reluctant to sell. It makes sense based on Amgen (AMGN, Financial)’s recent innovations, including the biologic drug Repatha, a $14,000 a year cholesterol treatment that significantly reduces the risk of heart attacks and strokes.
Amgen has a remarkable track record with these sorts of products, and its consistent stock growth makes it possible to negotiate treatment costs with patients who can’t afford the latest drugs. Unfortunately, you can’t negotiate the stock price in the same way, but if you hold on to Amgen for a few years, you’ll be amply rewarded.
The unexpected disruptor
Not every player in today’s health care industry is an obvious choice, but it’s important to be mindful of a central modern economic concept: disruption. That’s why, for those thinking broadly about health, it’s worth thinking about Amazon (AMZN, Financial) as a health care stock. Though Amazon remains essentially an ecommerce business right now, the company recently announced its intention to partner with JPMorgan Chase and Berkshire Hathaway to transform our current health care system.
Though the plan remains nonspecific, all indications suggest that the trio will use their combined economic power to provide employees with cheaper health care. Those efforts, combined with Amazon’s ongoing plans to provide prescription services suggest that the company is on the cusp of a major cost-cutting plan.
More Major Mergers
Finally, just as Amazon is attempting to transform how we think about healthcare, investors should also keep an eye on CVS Health Corp (CVS, Financial). In December 2017, CVS announced a merger with the insurance provider Aetna, with the goal of providing care in communities and reducing healthcare costs overall. Though these storefront clinics are still in the works, CVS could see major gains from this collaboration.
As of May 15, CVS is trading at about $65 a share, significantly less than Amgen or Amazon, so it’s a good middle ground for investors who have some money to commit, but not $100 or more a share. Though they may not seem like the big innovators, CVS is taking a boots-on-the-ground approach to comprehensive healthcare.
There are dozens of companies making waves in the health care industry, but it’s important for investors to focus on the stocks that are primed to disrupt, either with big discoveries or new approaches to care. So beware the companies that are sticking by the status quo. Health care is on the precipice and companies need to be ready to jump.
Disclosure: I do not own any of the stocks mentioned in this article.
