How to make massive profits in the next generation of healthcare
Pop quiz …
It’s 2008/2009, and the U.S. economy stands on the brink of ruin.
Roughly 8.7 million jobs will be lost between February 2008 and February 2010, which means unemployment will rise from 4.7% pre-recession to 10% at its height.
So, during this turmoil, which U.S. sector will actually grow, adding new jobs?
Here’s a clue …
Between 2003 and June 2014, it enjoyed 121 consecutive months of hiring growth.
Congrats to everyone who answered, “health care.”
I bring this up because Matt McCall just released his latest issue of Early Stage Investor last Wednesday, and it points toward enormous investment opportunities in the sector. As it stands today, healthcare is on the cusp of a new wave of growth. Consider a few numbers from Matt’s research:
Right now, more than $3.6 trillion is spent on U.S. health care — per year. That’s roughly 18% of the entire U.S. GDP.
Obviously, this number is affected by the size of our population — especially those individuals older than 65, given how health issues tend to increase with age. So, what are projections suggesting about the growth of this demographic?
According to the U.S. Census Bureau, the number of people older than 65 will grow from 43 million in 2012 to 84 million in 2050. Given this, spending on healthcare is expected to grow 64% to reach $6 trillion annually by 2027.
Here’s Matt for the quick takeaway:
When this ocean of money sloshes around, the dollar value of even the smallest ripples are huge … and a tremendous source of financial opportunities.
In today’s Digest, let’s dive into Matt’s analysis on one of his favorite niche sectors within the health care industry. As with all of Matt’s Early Stage sectors, it has enormous upside. So, let’s follow the trend, and the dollars, to find out how to take advantage of this opportunity today.
***”When the big money is betting on one investment theme, there is typically something worth keeping an eye on”
That’s how Matt introduces his research in his latest issue.
He goes on to explain that the goal of any emerging technology is to capture the attention of the big venture capitalists (VC) in order to get funding. The challenge, of course, is that the big VCs are very selective, and will only invest when there is an opportunity to many multiples on their investment.
This is why when Matt sees huge currents of VC money flowing into a young, budding industry, he takes notice.
From Matt’s issue:
Over the last few years, digital healthcare companies have been attracting a lot of big VC money. In fact, 2019 is on pace to be the best year on record for this industry.
Through the first six months of 2019, $4.2 billion have been invested in digital health companies. That’s up from only $1.1 billion in 2011. A total of 180 deals have been funded with an average deal size of $23.1 million.
At this point, Matt zeroes in on what’s been happening recently in the digital healthcare IPO space.
Since June 27, four businesses in the sector have gone public. The total value of those companies today is $7.1 billion. Prior to their IPOs, the companies received $1.7 billion in funding, which means early investors have made 4.2X their initial investments.
All of this VC money and the returns being generated is pointing toward an important investment takeaway.
A new wave of healthcare stocks is starting to change the multi-trillion-dollar industry for the better. I’m talking about telemedicine … personalized and precision treatments … next generation health monitoring via wearables … and an entirely new consumer-facing market for prevention and treatment.
The end result will be a better experience for patients and doctors alike. And along the way, trillions of dollars in potential profits.
That’s right. Trillions … with a “T.”
***A $2.4 trillion opportunity
Matt tells us that over the next eight years, U.S. healthcare spending is expected to grow 64% to $6 trillion annually. That’s an increase of $2.4 trillion from where we are today.
So, we have the number of aging Americans set to rise significantly. And we have VC companies pouring billions into digital healthcare startups. But what about established market leaders? Are they taking notice? After all, if the opportunity is abundant enough, we’d expect to see some interest from the tech sector.
It turns out, we can put a checkmark by that box as well.
Matt tells us that the biggest names in technology have taken notice of healthcare and are starting to funnel dollars into the sector.
Apple bought Tueo Health last year. Tueo provides apps and sensors for the monitoring of asthma in children. I have said for years that Apple has the potential to become one of the largest healthcare companies in the world. The first few generations of the Apple Watch were merely prototypes of what will eventually be a wearable health-monitoring device.
Nest, the smart home company, recently purchased Senosis, which provides health monitoring services. Nest is owned by Alphabet, and it is a well-known fact that Alphabet has been interested in disrupting the healthcare sector.
Amazon bought PillPack in 2018 for slightly more than $750 million. Again, it’s no secret that this tech giant has aspirations of disrupting the healthcare sector via its e-commerce platform.
JPMorgan Chase is also getting into the fray with its more than $500 million purchase of InstaMed, a healthcare payments company.
***Investing in digital healthcare
Matt’s pick this month helps people who live with a specific chronic health condition, which is defined as a physical or mental health issue that lasts for more than one year and requires ongoing monitoring. Some of the most prevalent are hypertension, high cholesterol, mood disorders, and diabetes.
Out of respect for the Early Stage Investor subscribers, I’m not able to reveal the specific name at this point. However, Matt did give me the go-ahead to reveal two digital healthcare companies with upcoming IPOs which should be on your watchlist.
First, we have Peleton. Matt tells us this maker of high-end stationary bikes and treadmills has already filed its IPO paperwork with the SEC. According to the most recent round of funding, it’s valued at more than $4 billion, and some reports suggest an IPO price as high as $8 billion. That means it will likely be the biggest digital healthcare IPO of the year.
The second watch-list company is SmilesDirectClub, which makes clear aligners to fix crooked teeth.
SmileDirectClub may not appear to implement groundbreaking technology, but it has upended the lucrative braces business.
I shared the 22nd floor of an office building with the company last year and saw the technology firsthand. SmileDirectClub is definitely a high-growth, early stage tech business. And on top of that, I was very impressed with the number of customers coming and going daily.
Now, to be clear, at this point Matt is not officially recommending you buy either company after they IPO. After all, we don’t know where their shares will be priced. However, both are definitely worth watching as the digital healthcare sector continues to gain momentum.
***Looking forward, Matt sees the same upside in digital healthcare that he and his subscribers have already enjoyed with genetic testing
Another healthcare niche that Matt has led his Early Stage Investor subscribers into is small-cap genetic testing companies.
As I’ve mentioned, the future of healthcare will be all about personalized and precision medicine. Instead of the current, one-size-fits-all approach to treating illnesses, the future will involve treatments that are based on your specific and unique genetic makeup. The key to this is genetic testing. Without genetic testing, the future of healthcare cannot happen.
Matt now has four of them in his genetic testing bucket. As I write, they’re up, respectively, 8%, 56%, 77%, and 87%. Impressively, these gains have come even though none has been in Matt’s portfolio for even a full year yet.
Matt believes the digital healthcare sector will be as lucrative as the genetic-testing sector. Here’s how he just put it to subscribers:
Clearly there is a lot of money to be made in the future of healthcare. But genetic testing is just one of the sector’s many niche areas. Digital healthcare is the latest one to flash buy signals across my screens … I am confident that digital healthcare holds just as much upside for us to capture.
To get more of Matt’s digital healthcare research, and to discover his latest Early Stage Investor recommendation, click here. It’s a company that Wall Street estimates will grow its revenues 133% to $159.5 million in 2019. And by 2021, the top line is expected to surge to $430.5 million. As Matt says, “this company is a true growth story“.
At a minimum, keep Peleton and SmileDirectClub on your radar as they approach their respective IPOs.
Have a good evening,