With cold and flu season upon us, now is the perfect time to start thinking about health care. But before we stock up on tissues and hand sanitizer, we need to think about ways we can add a little health care to our portfolios. As the baby boomer generation crosses the threshold into retirement, there has been an increasing emphasis on keeping our aging population healthy.
This, and Washington’s growing obsession with health care reform, spells out significant upside for the health care industry. According to the regulatory agency behind Medicare and Medicaid, health care spending is expected to grow by an average of 5.8% per year through 2020. And that’s not all: The same agency also forecasts that health care spending will make up a whopping 20% of GDP in eight years! These three health care stocks represent the best profit opportunities out there. Not only are their fundamentals in peak condition, but they have the ability for explosive growth.
HMS Holdings Corp. (NASDAQ:HMSY) keeps government health providers from overpaying for benefits or making costly errors in billing. And with Washington increasingly focused on keeping health care costs down, HMS Holdings will only see more success in the months ahead. Last quarter, sales were hit by regulatory slowdowns in implementing Recovery Audit Contractor contracts. Although company leadership expects this regulatory change will affect revenues for full-year 2011, they are optimistic about the long-run implications of these regulations. So, for 2012, the company expects sales to grow 20% to $435 million and earnings to jump 23% to 74 cents per share. Also, the company is picking up in operational performance.
2012 Estimated Sales Growth: 34.2%
2012 Estimated Earnings Growth: 13.6%
Transcend Services Inc. (NASDAQ:TRCR) is a medical transcription company that uses Internet-based technology to turn doctors’ audio patient records into written text. This saves time, money and prevents errors — and that is exactly what the industry needs right now. The company is growing sales at a record pace thanks to a growing number of first-time outsourcing of hospitals’ transcriptionists. According to company leadership, in the last quarter, Transcend Services sold new business that should generate between $3.8 million and $4.7 million in annual revenue. The company also is keeping costs down by restructuring its operations in India. So Transcend Services is keeping sales up and costs down — this sounds like a recipe for success in the next quarter.
2012 Estimated Sales Growth: 14.7%
2012 Estimated Earnings Growth: 16.4%
Valeant Pharmaceuticals (NYSE:VRX) has been on a buying spree, and I believe this will translate into major profits in the next year. Valeant acquired Afexa Life Sciences in late October, Kaunau Pharmaceuticals in mid-August and has announced plans to acquire both Ortho Dermatologics and Dermik. Most recently, the company announced that it plans to buy iNova Pharmaceuticals of Australia. Valeant company management is gung-ho about the deal because adding iNova will transform the company’s market share on three continents. Valeant expects the transaction to provide returns immediately.
2012 Estimated Sales Growth: 15.6%
2012 Estimated Earnings Growth: N/A
