Like it or not, Obamacare is here to stay. As an investor, you have to be dispassionate toward political decisions. Once a course is set, it’s about finding opportunities quickly — not licking your wounds or carping.
As healthcare consolidates, some relatively small companies have growth opportunities as their businesses grow and as potential buyout targets. We’ve seen the action with big healthcare insurers.
Once they’ve consolidated, they’ll be looking to add some of the smaller players. And on the other side, medical providers will continue to consolidate to maintain their pricing power over the insurers.
And pharmaceuticals and biotechs are always targets for capital as big pharma struggles with blockbuster drugs coming off patent and keeping their pipelines full of promising replacements.
Our top seven healthcare stocks to profit from Obamacare each fit in one of those very exciting niches.
7 Healthcare Stocks to Profit From Obamacare: Adeptus Health (ADPT)
Adeptus Health (ADPT) has a crucial niche.
It is the national leader in independent freestanding emergency rooms. Under the name First Choice, it operates more than 55 emergency rooms in Texas and Colorado.
It also recently opened Dignity Health Arizona General Hospital outside of Phoenix. This is its first full-service hospital.
ADPT is in a great niche since many low-income people still use emergency rooms as their primary care facilities and now the Affordable Care Act (ACA) will be picking up more of their tab. That helps margins grow.
Plus, it’s likely that at some point a large hospital organization will be interested in snapping up this growing company at a nice premium.
Either way, ADPT is in play and it will only get stronger as ACA puts more of the uninsured on its roles.
It’s no surprise the stock is up almost 150% year to date, with plenty of legs left.
7 Healthcare Stocks to Profit From Obamacare: ICU Medical (ICUI)
ICU Medical (ICUI) is a medical device company that specializes in needle-free collection devices, infusion technologies, oncology and hazardous drug handling systems.
No, it’s not glamorous, but it is a daily part of medical operations in every healthcare facility and lab in the country. This maker of quality medical equipment counts on volume to make it business hum.
And it’s been humming. Last quarter, the company blew away earnings by 93%. And while analysts have now jacked up earnings expectations, the stock is only up 16% year to date without a spike after its surprise.
Either analysts are embarrassed about being wrong and are finding reasons to ignore the company’s growth, or they’re continuing to ignore its potential.
Zack’s is now on board, rating it a strong buy.
ICUI products are continuing to get good press for lowering bacterial contamination and being a leader in hazardous chemical protection. Remember that most chemotherapy is extremely toxic and corrosive; getting on the skin or in contact with any tissue beyond the vein can damaging and dangerous.
Its next earnings report will be on Aug. 10.
7 Healthcare Stocks to Profit From Obamacare: Cambrex (CBM)
Cambrex (CBM) is a big deal. Much bigger than its $1.4 billion market cap.
It’s the leader in a market known as Contract Manufacturing Organizations (CMO). And it’s becoming very big business.
Market research firm Visiongain forecasts that the worldwide pharmaceutical custom manufacturing market will grow to $71 billion by 2018.
CMOs allow drug and biotech companies farm out their research and development on certain drugs they’re developing. Cambrex specializes in late stage development (Phase II trials and beyond) where there’s a higher chance of product approval, less competition and higher asset utilization.
It has six operation sites in the U.S., European Union and India. And its FDA recognition as a certified GMP (Good Manufacturing Practices) producer helps a great deal with its clients when it comes to getting trials and testing done with as little trouble and as quickly as possible. All Phase II and Phase III trials require GMP facilities.
At this point, 60% of CBM’s revenue comes from new drugs it builds for drug companies. About 24% comes from generics and 14% comes from controlled substances.
7 Healthcare Stocks to Profit From Obamacare: U.S. Physical Therapy (USPH)
U.S. Physical Therapy (USPH) is the largest outpatient physical and occupational therapy provider in the U.S. With more than 480 clinics in 42 states, it has consolidated a very important sector of the healthcare industry.
By creating partnerships and limited partnerships with local providers, it allows the individual providers to become part of larger network and get some marketing and back office benefits from USPH.
But the founders retain a majority stake in their operations, which dilutes USPH exposure to regional and individual market vagaries while creating a steady income stream.
Physical therapy will be another sector that ACA will have a positive impact on, since many under-insured and uninsured qualified for little or no therapy, or had co-pays that made it impractical to use.
Net income was up 27% in the latest quarter compared to the same quarter a year ago. Debt-to-equity is very low and earnings are growing well.
The stock is up almost 30% year to date but there’s a lot of room to run now.
7 Healthcare Stocks to Profit From Obamacare: Zeltiq Aesthetics (ZLTQ)
Zeltiq Aesthetics (ZLTQ) is a leader in one of the hottest trends in cosmetic surgery/therapies.
It’s called the CoolSculpting System. It’s a non-surgical system that essentially freezes body fat that your body then flushes out of its system.
This is basically liposuction 2.0. It allows people to remove unwanted fat from certain parts of their bodies using an FDA-approved, non-surgical process.
ZLTQ sells its equipment to various firms, from cosmetic surgeons to high-end spas, for use on clients. You first need to consult with a physician before undergoing the treatment to make sure you are a candidate and it will be safe and effective for your goals.
By simply selling the equipment to established practices, it means ZLTQ doesn’t have the overhead of setting up stores, hiring employees, etc. So far this have been very helpful.
If the trend continues, franchising operations, may be a next step in its evolution.
Its popularity is increasing and may even get some insurance coverage since its non-invasive and doesn’t require any recovery time.
7 Healthcare Stocks to Profit From Obamacare: LHC Group (LHCG)
LHC Group (LHCG) focuses on post-acute care services. That means it helps people that are older and need help in recovery or end of life issues. The company operates in four divisions: home services, acute long-term care, hospice care and community based services.
The care can be done in one of LHCG’s facilities or at the client’s home, depending upon need. It already has 10,000 employees in 29 states.
As 76 million baby boomers age, these types of services are going to be in increasing demand. No one likes to think about this stage in life but it’s very real, and it’s going to be even more real to about 25% of the U.S. population over the next two decades.
The stock is up 20% in the past year and should get more attention in coming quarters.
7 Healthcare Stocks to Profit From Obamacare: SciClone Pharmaceuticals (SCLN)
SciClone Pharmaceuticals (SCLN) is another unique biotech play in the sense that it’s a U.S.-based company whose key market is China. It has its own proprietary drug, Zadaxin, which is a hepatitis B and C (HVB and HVC) drug that also has other uses.
SCLN also markets a number of other drugs in China that are from other manufacturers.
China is an interesting market for non-Chinese companies because the internal efforts are to build up the Chinese pharmaceutical and biotech industries — not just hand over the market to Western firms.
SCLN walks a thin line into this marketplace, especially in the HVB and HVC sectors. Right now, there are two big drugs on the market that cure HVC but they’re inordinately expensive.
As China looks for low-cost generics to provide is population, it’s also looking for effective treatments that won’t cost citizens or the government a huge amount of money. And Zadaxin may be that drug.
And right now the stock is cheap given the turmoil in China. Even after getting hammered, the stock is up 15% year to date.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.