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Health Care Stocks Are Big Winners for an Aging Population

- By Anna Johansson

Health care is a persistent crisis point for Americans, with the population living longer yet experiencing higher rates of chronic disease than past generations. As a result, we need to find a way to meet those needs at a population level. One solution: investment. A growing community of health care startups, along with established companies, are introducing innovative solutions that aim to meet patients where they live.


Based on their health care offerings, savvy investors should consider buying these four stocks and holding on for the ride. Unless there's a major shakeup in the near future, these health care-focused companies are changing the landscape of how we care for our communities.

Walgreens

Walgreens Boots Alliance Inc. (WBA) recently hit some bumps and landed flat at a five-year low, trading below $60. Regardless, the stock is still trading at over 2.5 times book value and over 11 times earnings. In addition, the company is positioned to be at the heart of health care for aging populations.

From basic health care products like over-the-counter medications and household medical equipment to the pharmacy sector and pop-up clinics, Walgreens can easily come back and rally in the coming months.

Centene

Most people haven't heard of Centene (CNC), but the St. Louis-based insurer is set to make waves. The company focuses on a large, vulnerable market sector: the uninsured and underinsured. As part of that focus, the company receives significant government subsidies. It has buying power because it is a pharmacy benefits manager, which can be a serious advantage when it comes to getting drugs into low-income patients' hands.

Focusing on services for the uninsured or underinsured is a good move right now because they're sorely needed and likely to be heavily utilized. Despite the insurance mandate, there are at least 28 million uninsured Americans flooding urgent care centers and ERs for minor complaints. Some will turn to telehealth, but bringing more traditional insurance options to the table for these individuals should be a top priority.

Welltower

As the U.S.'s largest public health care real estate investment trust, Welltower (WELL) offers an interesting blend of services. By focusing on property, the company is able to leverage those spaces to provide senior housing as well as outpatient and post-acute care services, particularly in major urban areas. This combination service model is ideal for an aging population that is likely to seek greater freedom in their housing options, yet will still require complex medical support.

Welltower offers services in the vein of assisted living, but with a higher level of medical care integrated directly into the property holdings. Additionally, as an investor, REITs are required to pay out 90% of taxable income as dividends. Now is the time to get on board with Welltower and be on the lookout for its services in New York City, Boston and London.

Osmotica Pharmaceuticals

At a time when the pharmaceutical market is dominated by a few large companies, small drug developers have a difficult time making an impact. That's why Osmotica Pharmaceuticals (OSMT) is so interesting; its small parcel of products focus heavily on dosing using a proprietary osmotic drug delivery system. This places the company in a unique position relative to research and development expenses - it primarily needs to re-engineer existing drugs to fit this system. As a small company, Osmotica is affordable, trading under $7 per share but with a strong buy rating. Even if the company doesn't make it big, it is a strong contender for exciting acquisition opportunities down the line.

2018 was a big year in health care investing as US health care venture capital funding hit $9.6 billion and device initial public offerings doubling year over year. 2019 promises to bring the same. Now is the time to establish long-term investments and stick with them. The need for health care is only going to continue to grow, and innovative companies can rise to the challenge.

Disclosure: I do not own any of the stocks mentioned in this article.

This article first appeared on GuruFocus.