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Just a few weeks ago, I wrote that it was perhaps the most dangerous time to invest in health sector actions. I did not exaggerate. There has never been so much serious discussion about setting up a single payer health system in the United States. With nearly half of the 2.8 million Democratic presidential candidates (by donating a few) promoting Medicare for All, many health care titles could skate on the ice. .
But there are actions in the health sector that I think should behave very well in the long run, regardless of what happens with health reform in the United States. Three health titles that I would now buy without scruple are Illumina (NASDAQ: ILMN), Health Teladoc (NYSE: TDOC), and Guardian's health (NASDAQ: GH). Here's why.
Source of the image: Getty Images.
1. Illumina
Illumina is the 800 kilogram gorilla in the genomic sequencing industry. The company's technology has paved the way for a drastic reduction in the costs of mapping the human genome. Illumina has continued to innovate and its relatively new NovaSeq system has resulted in significant growth in the company's sales over the past year.
But we only touched on the potential of genomic sequencing. Illumina CEO Francis deSouza listed several important statistics in his comments JP Morgan Conference on health care earlier this year. He noted that less than 0.01% of the animal species had their genome sequenced. Less than 0.02% of human genomes have been sequenced. And less than 1% of the variants of the human genome have been completely characterized.
Illumina should benefit from several trends in the years to come. Consumer genomics products, such as the Ancestry and 23andMe kits, have been popular in the United States for genealogical purposes, but offer many opportunities for growth in international markets and help identify the genetic characteristics of the genetics. health. The demand for non-invasive prenatal tests (NIPT) continues to increase. The greatest opportunities, however, lie in the research and treatment of diseases, especially rare and undiagnosed diseases.
Illumina generates the majority of its revenue by providing consumables used in sequencing. As the use of genomic sequencing becomes more widespread, I anticipate that Illumina's recurring revenues will snowball, which will allow the company to invest even more money into the future. Innovation to maintain its competitive position.
2. Health Teladoc
Teladoc Health is also the undisputed leader in its market. This market is that of telehealth services. More than 12,000 customers use Teladoc Health, including approximately 40% of the Fortune 500 group.
There are many companies that offer telehealth services. But none of them is as big as Teladoc. None of them have Teladoc's comprehensive service offerings. And none of them claims a global presence like Teladoc, with operations in 130 countries.
It's a safe bet that the demand for telehealth services will increase in the future. Visiting a doctor virtually over the Internet or by phone is much more convenient for patients than going to the doctor's office. Telehealth is also a solution to the growing problem of the shortage of doctors in some areas.
More importantly, telehealth helps control the costs of health care. This is one of the main reasons the US government is defending the use of telehealth in Medicare and Medicaid, according to Teladoc Health CEO Jason Gorevic. I think these factors, combined with Teladoc's dominant market presence and unparalleled range of services, should allow the company to earn even more over the next few years.
3. Guardian's health
My colleague Cory Renauer called Guardant Health "the best stock of health products you have ever heard of". I think Cory may be right – although more and more investors are aware of the title, given Guardant's outstanding performance so far this year.
Guardant Health is a pioneer in the development of liquid biopsies that can detect cancer with the help of blood tests. The company currently markets two liquid biopsy products, Guardant360 and GuardantOMNI, used for advanced cancer screening. These products have not yet been officially approved by the Food and Drug Administration, but Guardant can sell them as "laboratory-developed tests" designed for use in a single laboratory.
Early detection of cancer with liquid biopsies is an even greater opportunity. Guardant Health has also made progress on this front by launching its LUNAR DNA test for researchers to detect cancer at an early stage and cancer recurrence.
What is the opportunity that could have Guardant Health? Screening patients at high risk of cancer could represent an annual market of $ 18 billion in the United States alone. Screening for cancer recurrence could be another annual $ 15 billion opportunity. Guardant Health appears to be well positioned to capture a significant portion of these markets.
What about these dizzying ratings?
You might be wary of the exorbitant evaluations of Illumina, Teladoc Health and Guardant Health. Illumina shares are trading at nearly 40 times the expected profits. Neither Teladoc Health nor Guardant Health are yet profitable, but companies claim market caps of over $ 4 billion and $ 6 billion, respectively.
My opinion, however, is that equities with premium growth opportunities deserve higher prices. I think these three titles of health should experience significant growth in the long term. Today's seemingly dizzying estimates could look like bargain prices in a few years.
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