Trading in Healthcare Stocks
Trading in Healthcare Stocks
Healthcare is one market segment that is essentially recession-proof. People will always get sick and require medical care, prescription medications, and in more extensive cases hospitalization or long-term care. This presents a growth market for investors, especially in light of the aging population of the baby boomer generation. Healthcare in the US is now available to more families and individuals with the implementation of the Affordable Care Act also known as Obamacare. Access to affordable medical attention means more use of office visits, prescription drugs, and more advanced services, and therefore increased demand.
Healthcare stocks in general have outperformed the S&P as a whole in recent years adding to their allure for traders. Well-respected firms such as Johnson & Johnson (JNJ) or Pfizer (PFE) provide stability and long-term rewards but may not be the vehicle day traders look to for quick gains.
There are several key indicators that can guide you toward trades that hold the most promise:
Investing basics: rudimentary investment practices include evaluating companies for solid balance sheets, history of consistent earnings and dividends, and seasoned management organizations. These rules apply to healthcare companies as well.
Drug companies: investigate enough to determine whether the company’s leading products are protected by patents that suggest continued earnings for at least some period of time. Once such patents expire the competition begins to kick in with lower prices in generic form.
Biotech firms: if your enticed by the chemistry of biotech firms and the potential for future gains your focus should be on those companies that have matured enough to have some approved products on the market that assures you of their viability.
Managed care providers: these vary in their exposure or benefit from the Affordable Care Act (ACA). Looming political challenges that may result from 2016’s Presidential election could have an impact on insurance payments to managed care providers such as UnitedHealth (UNH) and Anthem (ANTM). While expansion of Medicaid benefits could result in more coverage funneled through Anthem, UnitedHealth could be negatively impacted with reduced revenue due to lower pricing mandated by the ACA’s insurance exchanges.
Healthcare Equipment: regardless of who pays for such items the demand will be there for medical equipment. This may be an opportunity for growth for such companies as Teleflex (TFX) or Stryker (SYK). Boomers are likely to be large consumers of such equipment.
Are Healthcare Stocks Right for You?
Traders have many options when it comes to healthcare investments among them:
- Pharmaceutical giants
- Biotech companies
- Medical service providers
- Manufacturers of healthcare products including wheelchairs, scooters, etc.
- Funds invested heavily in multiple healthcare segments
- Public companies that provide long-term care facilities
Your individual analysis of each offering will determine the opportunities that most closely match your investment strategy. Be certain to weigh the segment you invest in against your own risk tolerance, as those qualities vary greatly among those selections. Consider such facts that biotech companies that are heavily focused on new medications have no guarantee of success in their endeavors or that their final products will even be approved for dispensing by regulatory agencies.
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Disclaimer: SureTrader Blog is not intended for U.S. persons. Stock information is not to be viewed as buy or sell recommendations.