Just a few weeks ago, I wrote that this could be the most dangerous time to invest in healthcare actions. I was not exaggerating. There has never been such a serious discussion about the implementation of a single-payer health system in the United States. With roughly half of the 2.8 million Democratic presidential candidates (more or less) promoting Medicare for all, many health actions could be skating on thin ice.
But there are some health actions that I think should work very well in the long term, regardless of what happens with the health reform of the United States. Three health care actions that I would buy at this time without qualms are Illumina (NASDAQ: ILMN), Health teladoc (NYSE: TDOC)Y Guard Health (NASDAQ: GH). This is the why.
Illumina is the 800 pound gorilla in the genomic sequencing industry. The company's technology has paved the way to drastically reduce the costs of mapping a human genome. Illumina has continued to innovate, as its relatively new NovaSeq system has driven significant sales growth for the company over the past year.
But we have only scratched the surface because of the potential of genomic sequencing. The CEO of Illumina, Francis deSouza, included several important statistics in his comments on the J. P. Morgan Health conference earlier this year. He pointed out that less than 0.01% of animal species had their genomes sequenced. Less than 0.02% of human genomes have been sequenced. And less than 1% of the variants in the human genome have been fully characterized.
Several trends should benefit Illumina for many years. Genomic products for the consumer, such as the Ancestry and 23andMe kits, have been important in the USA. UU For genealogical purposes, but they have many perspectives of growth in international markets and in the identification of genetic health characteristics. The demand for non-invasive prenatal testing (NIPT) continues to increase. However, the greatest opportunities are found in research and treatment of diseases, especially rare and undiagnosed diseases.
Illumina obtains most of its revenue by supplying consumables used in sequencing. As the use of genomic sequencing becomes widespread, I expect Illumina's recurring revenues to become a snowball, which will allow the company to invest even more money in innovation to maintain its competitive position.
2. Teladoc Health
Teladoc Health is also the clear leader in its market. That market is telehealth services. More than 12,000 customers use Teladoc Health, including around 40% of Fortune 500.
There are a lot of companies that offer telehealth services. But none of them is as big as Teladoc. None of them has the integral offer of services of Teladoc. And none of them claims a global presence as Teladoc does, with its operations in 130 countries.
It is a pretty sure bet that the demand for telehealth services will increase in the future. Visiting a doctor virtually through the Internet or through a phone call is much more convenient for patients than traveling to the doctor's office. Telehealth also offers a solution to address the growing problem of physician shortages in some areas.
However, the most important thing is that telehealth helps control the costs of medical care. That's a key reason why the United States government is promoting the use of telehealth in Medicare and Medicaid, according to Teladoc Health CEO Jason Gorevic. I believe that these factors, combined with the dominant presence of Teladoc in the market and the incomparable scope of services, should make the stock an even bigger winner in the coming years.
3. Health guardian
My colleague Cory Renauer has called Guardant Health "the best healthcare inventory I've ever heard." I think Cory could be right, although now more investors know the action, given the excellent performance of Guardant so far this year.
Guardant Health is a pioneer in the development of liquid biopsies that can detect cancer through blood tests. The company currently markets a couple of liquid biopsy products, Guardant360 and GuardantOMNI, which are used for advanced stage cancer detection. These products have not yet been officially approved by the Food and Drug Administration, but Guardant may sell them as "laboratory developed tests" designed for use in a single laboratory.
Detecting cancer in early stages using liquid biopsies presents an even greater opportunity. Guardant Health has also made progress on this front by launching its LUNAR DNA test for use by researchers in early cancer detection and cancer recurrence.
What great opportunity could Guardant Health have? The detection of patients at high risk of cancer could be an annual market of $ 18 billion only in the USA. UU The tests for cancer recurrence could be another $ 15 billion annual opportunity. Guardant Health seems to be in an excellent position to capture a considerable portion of these markets.
What about those valuable valuations?
You may be wary of the high ratings of Illumina, Teladoc Health and Guardant Health. Illumina shares are traded at almost 40 times the expected earnings. Neither Teladoc Health nor Guardant Health are profitable yet, but companies claim market limits of more than $ 4 billion and $ 6 billion, respectively.
However, my opinion is that stocks with premium growth opportunities deserve a higher price. I believe that the three health care actions are ready to grow significantly in the long term. Today's seemingly high valuations may seem like bargain prices within a few years.