Google Bets on Healthcare — You Should, Too

by Alyssa Oursler | September 19, 2013 11:17 am

Google Bets on Healthcare — You Should, Too

You’ve heard it before, and you’ll hear it again: Mega-trends make healthcare stocks a solid long-term bet.

But if the pile of data supporting that theory — including the fact that our population is rapidly growing and aging; obesity, cancer and other diseases have become more prevalent; and increasingly more Americans take prescription medications — isn’t enough to make you a believer, maybe this will be.

Silicon Valley star Google (GOOG[1]) — which has experimented with everything from self-driving cars[2] to Google Glass[3] — announced yesterday plans to launch Calico, a venture that will focus on human health and well-being, and will be led by Art Levinson, former CEO of Genentech and chairman of Apple (AAPL[4]).

One of Calico’s largest initiatives? Make us live longer — or help us “cheat death,” as Time put it[5].

While new innovations and experiments have become Google’s norm, pursuing them via an entirely separate company is a first under CEO Larry Page. And pursuing healthcare is still a surprise — even for a company who has more or less become known for trying crazy new things.

As Page put it[6]:

“OK … so you’re probably thinking wow! That’s a lot different from what Google does today. And you’re right. But as we explained in our first letter to shareholders, there’s tremendous potential for technology more generally to improve people’s lives. “

He added:

“Art and I are excited about tackling aging and illness. These issues affect us all — from the decreased mobility and mental agility that comes with age, to life-threatening diseases that exact a terrible physical and emotional toll on individuals and families.”

Of course, Page also noted that the new investment is “very small by comparison to our core business.” The services Google is best known for — including its search homepage, Gmail service and YouTube — still provide the bulk of its revenue, and should for the foreseeable future.

But while investors shouldn’t make a bet on healthcare by buying Google, they still would be smart to follow its lead. Already this year, the Healthcare SPDR (XLV[7]) — which holds companies from Pfizer (PFE[8]) to Abbott Laboratories (ABT[9]) to WellPoint (WLP[10]) — has been a better investment than both Google and the broader market so far this year.

And if a company best-known for Internet searches and wild new technologies is taking the time to throw money at the healthcare space, it’s a pretty good bet there’s something there.

As of this writing, Alyssa Oursler was long XLV. Follow her on Twitter at @alyssaoursler[11].

Endnotes:
  1. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  2. self-driving cars: http://investorplace.com/2012/05/google-self-driving-car-gets-licensed/
  3. Google Glass: http://investorplace.com/2013/08/the-next-version-of-google-glass-may-not-look-so-dorky/
  4. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  5. as Time put it: http://business.time.com/2013/09/18/google-extend-human-life/
  6. As Page put it: https://plus.google.com/+LarryPage/posts/Lh8SKC6sED1
  7. XLV: http://studio-5.financialcontent.com/investplace/quote?Symbol=XLV
  8. PFE: http://studio-5.financialcontent.com/investplace/quote?Symbol=PFE
  9. ABT: http://studio-5.financialcontent.com/investplace/quote?Symbol=ABT
  10. WLP: http://studio-5.financialcontent.com/investplace/quote?Symbol=WLP
  11. @alyssaoursler: http://twitter.com/alyssaoursler

Source URL: http://investorplace.com/2013/09/google-calico-healthcare-live-longer/
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