Telemedicine, also known as telehealth, has come into strong focus due to the onset of the novel coronavirus this year. It’s a great time to consider delving into this fast-growing area of health care. If you’re ready to give this niche a try, the Global X Telemedicine & Digital Health ETF (NASDAQ:EDOC) can give you exposure to a good representative sample of high-quality telemedicine stocks.
InvestorPlace contributor Todd Shriber included the EDOC ETF among his list of three health-care stocks to buy for health and safety. Shriber’s article is a must-read for anyone seeking to expand their health-care sector holdings.
Shriber points out that two of the most well-known names in telemedicine are Teladoc (NYSE:TDOC) and the company that Teladoc’s merging with, Livongo Health (NASDAQ:LVGO).
This begs the question of why prospective telehealth investors shouldn’t just buy TDOC stock. After all, Teladoc is a front-runner in the field. Yet, a strong argument can be made in favor of owning the EDOC ETF instead of just one telemedicine stock.
Why Invest in Telemedicine Stocks?
But first, it’s important to understand why investors ought to consider telehealth stocks in the first place. Some traders might never have even heard about telemedicine until 2020.
With the onset of Covid-19, the virtual delivery of health care is more than just a trend. It’s a legitimate health-care modality as both patents and health-care practitioners seek to avoid face-to-face contact whenever it’s feasible to do so.
As evidence of this, Global X provides a startling statistic along with a good working definition of telehealth: “Some U.S. health care providers report that telehealth visits, defined as consultations in which a patient connects with a doctor via voice or video chat, increased by as much as 175x since the pandemic began.”
Moreover, Global X reports a projection that the market for telehealth and digital health technologies will grow to more than $657 billion by 2026. Now, that’s what I would call a hyper-growth market.
A Right-Sized ETF
Hopefully, you’re now convinced that telemedicine is an excellent niche market to invest in today. Next, we must consider a question that stock pickers might raise. Why not just buy shares of Teladoc stock?
With InvestorPlace contributor Laura Hoy including TDOC stock on her list of seven innovative stocks pushing our world ahead, I can’t blame anyone for wanting to take a position in Teladoc shares. Yet, there are a couple of issues to be aware of.
For one thing, TDOC stock isn’t cheap. On Oct. 19, Teladoc stock was priced at around $225 per share. That’s not necessarily right-sized for smaller trading accounts.
Plus, there might be concerns about the valuation of TDOC stock. This stock is much closer to its 52-week high of $253 than its 52-week low of $66.23.
Meanwhile, the EDOC ETF could be owned on Oct. 19 for just $17 and change. Moreover, its annual expense ratio is 0.68%, which isn’t exorbitant.
Bargain-Priced Diversification
Perhaps more importantly, the EDOC ETF isn’t just affordable; it also a offers portfolio diversification that you won’t get from a single stock.
A view of the ETF’s top holdings should convince you of this. Sure, you’ve got LVGO stock in there, and that’s connected with Teladoc.
But you’ll also find a broad array of other telehealth names, including some lesser-known ones. Here’s a sampling:
- Irhythm Technologies (NASDAQ:IRTC), which sells ambulatory electrocardiogram (ECG) monitoring products
- Nuance Communications (NASDAQ:NUAN), which specializes in conversational artificial intelligence (AI) solutions
- Insulet Corporation (NASDAQ:PODD), which develops tech-enhanced insulin delivery systems
- Guardant Health (NASDAQ:GH), a supplier of precision oncology products
Some of the stocks encompassed in the EDOC ETF are more expensive than others. However, that won’t matter if you’re buying the ETF. Plus, your profits and losses won’t be excessively reliant on any particular company.
The Bottom Line
Given the outstanding growth potential of telehealth in the age of Covid-19, it’s an ideal time to invest in telemedicine stocks.
Thankfully, you don’t have to research and place your bets on individual stocks. Instead, you can simply buy and hold the EDOC ETF to participate in the telemedicine revolution.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
