The One-Two Punch of Health Tech Stocks

While the market continues its sideways movement, two sectors in particular stood out last week and have been leaders all year: healthcare and technology. More specifically, healthcare stocks jumped last week thanks to strong Obamacare numbers. The U.S. government announced that 6 million people have signed up for the program, including 2.4 million new customers.

stocks to buy healthcare stocksThe healthcare sector has suffered ups and downs, like all stocks this year, but it’s at least come out 5% in the black thus far in 2015, while the S&P 500 remains flat. Tech stocks also helped send the markets higher last week and have gains north of 6% on the books for 2015.

I expect momentum for both sectors to continue into 2015, and I’m not alone. John Manley, chief equity strategist with Wells Fargo Funds is particularly bullish on business-to-business technology and healthcare in 2016…which is why I believe all investors would be better on a space that combines their strengths: health tech.

Health Tech Will Be a Massive Industry

Between all the investments pouring into technology, the rapid aging of the American population, and our tendency to outspend the rest of the world on healthcare, the health tech space is the perfect storm. This encompasses everything from healthcare IT to healthcare robotics — an industry that is expected to total $3.8 billion by 2018, thanks to annualized growth north of 16%.

It’s no wonder healthcare leader Johnson & Johnson (JNJ) — a stock I’ve applauded before for its growth, dividend, footprint and more — has teamed up with tech behemoth Alphabet (GOOGL, GOOG) to offer hospitals more powerful robotics tools. While it’s too early to invest in this deal directly, it’s undeniable validation for the demand and growth to come for the industry.

Plenty of other picks offer a far more direct play on health tech, too — at least from a Main Street investor’s perspective. Just consider California-based Simulations Plus (SLP), which is another company at the heart of the convergence of technology (in this case, software) and health, as it offers modeling and simulation software for the pharmaceutical and biotechnology industries, to name a few.

In 2015, that focus paid off with eye-popping 45% gains — another bullet point in the bull case for the space. Meanwhile, several other names in the space have slightly outperformed the market in 2016, leaving them poised for even more gains in the coming year.

The cherry on top for me is the fact that health tech remains a relatively new industry. New industries naturally have far more room for growth (this is an argument I’ve been making regarding cybersecurity stocks for some time). Healthcare technology is a similar story in the sense that it’s tied to something that’s indisposable for most Americans (just as data protection is these days), and yet the market is far from tapped out.

Add it up, and health tech is an industry that most investors simply can’t afford to ignore. While the market was uncertain in 2015, there’s little uncertainty about the upside here. Health tech is a one-two punch that’s going to pay off big-time.

Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.

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