According to the Centers for Medicare and Medicaid Services, healthcare spending will rise 5.5% annually through 2026, when that spending will represent 20% of the country’s GDP; a boon for healthcare stocks.
To put this in perspective, the U.S. defense budget is about 18% of the entire U.S. budget and we outspend every other nation on this planet in defense spending by a significant margin.
The U.S. healthcare system is being debated again and may well be a significant issue in the upcoming presidential election.
But the reality is, the U.S. population is getting older and that means more chronic diseases begin to take their toll. Also, older people tend to take up a larger portion of healthcare costs as their health begins to fail.
That means there will be an unstoppable growth trend in place for healthcare companies. The A-rated healthcare stocks I feature here are well placed to take advantage of this trend. And they’re small enough that their growth will outpace their larger competitors and may make them interesting takeover targets.
Masimo Corp (NASDAQ:MASI) is the perfect example of how technology is transforming healthcare.
Once, heading the doctors or the hospital was a regular occurrence for patients with chronic issues like heart disease or diabetes. But now, monitoring technologies, where patients can wear a device that essentially tracks their functions and the data can either be downloaded remotely or by the patient and sent to the doctor, are becoming increasingly common.
And MASI is one of the leaders in the field. It is also one of the two top players in the pulse oximetry sector. These are devices that check the oxygen saturation level a person’s blood. Hospitals use these a great deal and generally the contracts run on a five-year basis, so income is steady and once they’re in place it’s unlikely the hospitals will switch over to a new type of unit, so there are solid competitive moats.
MASI is up almost 44% in the past 12 months, and much of that has come in 2019. This is the kind of company that can grow with the market regardless of what U.S. healthcare ends up looking like.
Ionis Pharmaceuticals (IONS)
Ionis Pharmaceuticals (NASDAQ:IONS) was founded by leading biotech scientists to expand the use of antisense therapy. It’s a new form of treatment that is at the cutting edge of science medicine.
Basically, if you can find a genetic marker for a disease, you can synthesize a strand of RNA that can render that gene inactive, so it doesn’t reproduce. The potential uses extend to cancers, heart disease, diabetes, asthma, arthritis … the list goes on.
This technology has the potential to help both rare and common maladies, many of which don’t have current effective treatments.
IONS is already partnered with a number of larger pharmaceutical firms and is up 55% in the past year, with plenty of headroom left.
Osiris Therapeutics (OSIR)
Osiris Therapeutics (NASDAQ:OSIR) has a market cap around $650 million, so it’s in that perfect spot where it has the potential for big growth on its own, or it could be a target for takeover at a nice premium for a larger pharma looking for a unique product line.
OSIR specializes in regenerative medicine products. What that means is, it uses stem cells to build medicines that help everything from wound healing to bone marrow graft acceptance. It’s a unique space that has significant possibilities now and for the future.
It currently has five products on the market that are focused on wound healing, ligament repairs and surgical wraps on tissues. All promote better healing outcomes with less infections than traditional methods.
Last quarter it sold the rights to one of its top stem cell drug for $100 million, so it’s work is being recognized. OSIR stock is up 141% for the year and 40% in 2019.
Ensign Group (ENSG)
Ensign Group (NASDAQ:ENSG) specializes in post-acute care staffing for a wide variety of facilities that would need these services. Some of the most obvious would be assisted living facilities, home health care, rehab facilities and hospice. It manages 250 companies in more than 12 states, around the U.S.
This is precisely the sort of sector that will be in huge demand in coming years. While all the technology and new drugs are great, there will still need to be qualified people helping support the patients as they recover and attempt to maintain active lifestyles.
It continues to expand its base in California, where the company is headquartered, having just bought another company in Southern California. But its operations beyond the state show that it has what it takes to expand its model where the most opportunity is.
Up 59% in the past year, its size makes it a potential takeover target or a big grower on its own.
Genomic Health (GHDX)
Genomic Health (NASDAQ:GHDX) specializes in genomic diagnostic testing, specifically for cancer. The testing allows for patients and doctors to create individualized treatment strategies for patients.
This is important because it means patients get the treatment they need — they’re not over-treated or under-treated. And that is good for the whole healthcare system as well as the patients.
Again, this kind of diagnostic tool will be something that insurers, hospitals and patients can get behind since it allows care to better suited to each patient with the goal of lowering costs and improving outcomes.
The stock is up over 38% in the past year and it’s still going strong.
National Research Corp (NRC)
National Research (NASDAQ:NRC) is all about delivering all the best possible outcomes for patients with their healthcare providers. NRC sees the current and future healthcare sector as patient-driven, and that is not the traditional model.
The patient wasn’t much more than a bundle of symptoms that were inserted into the healthcare machines to get repaired and sent back out into the world before. Now, it’s about creating an experience that not only serves the patient better, but is able to deliver better outcomes and fewer return visits. It’s looking at numbers that view the system more holistically.
And NRC provides those numbers from its research.
While it has been around since 1981, NRC is just coming into its own. And it would be a great takeover target for one of the big healthcare insurers or a large hospital chain.
Up 26% in the past year, NRC also delivers a nearly a 2% dividend.
AngioDynamics (NASDAQ:ANGO) is a medical device company that specializes in equipment that’s used for vascular access, surgery, vascular disease and oncology. It actually made a new acquisition earlier this year to increase its oncology suite of products.
Specialty medical device makers are in particular demand globally, since the good ones tend to get most of the business. Medicine is a very conservative practice and tested and true is much more preferable to new and interesting.
And generally that’s the view from hospitals, insurers and patients. It takes years to put new equipment in place and generally the new equipment is from a trusted equipment maker and not the kid on the block. Having been around since 1988, ANGO fits that bill.
Although its global potential looks huge as China looks to upgrade its entire healthcare system, it’s been volatile over the last year and relatively flat (actually down .3%). Most of the volatility is trade war related and that can’t last forever.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
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