Investing in a Post-COVID Healthcare Revolution

By Kirsteen Mackay

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The healthcare industry is vast, covering an array of disciplines, ideas and revolutionary changes. Read on to discover how investing in this domain can be lucrative.

Investing in healthcare

It goes without saying that the COVID-19 pandemic has had a profound effect on the entire planet. But, despite the countless problems it has caused, it appears to have spurred a revolution in the healthcare industry.

CRISPR genome editing, robotic surgeries, mental health, and the psychedelic revolution; all these topics and more are covered in our extensive report on the healthcare industry.

Investing in a changing landscape

Within healthcare, there are several different branches, including pharmaceuticals and biotechnology. While pharmaceuticals reign supreme, the sector is more evenly balanced between various healthcare divisions.

This is the breakdown from the S&P 500 GICS Sector Scorecard

Apart from the S&P 500 GICS Health Sector, Life and Health Insurance come under the Financial Sector. There are undoubtedly cross-overs between the two, just as there are crossovers in other sectors. Such as Health Care REITs under Real Estate, and some health and fitness products fall under Consumer Discretionary.

Some large-caps work across multiple branches, while small and micro-caps often specialize in a specific area.

Healthcare has always been a primary concern for people – long before we could invest in it. Secrets for curing sickness have been handed down from generation to generation for centuries.

Over the years, infectious diseases have also had a considerable effect on healthcare, exacerbated by urbanization and globalization. The COVID-19 pandemic has further highlighted this, but it has also accelerated the path to innovation and breakthroughs in vaccinations, preventions, and treatments.

What that means for modern-day investors is that there are a wide-ranging variety of businesses in which to buy shares. But as technological breakthroughs continue to advance rapidly, the landscape is ever-changing, and speculation is rife.

Bespoke healthcare

Healthcare is essentially a personal or local undertaking. But as the world has become globalized, the companies operating in the industry have a more global presence while aiming to provide a personalized solution.

Personalized healthcare is the future of healthcare. A one size fits all approach is no longer acceptable as individuals respond differently to treatments and patients seek more holistic solutions.

Today we’re being introduced to targeted medicines that are designed to treat specific ailments. But companies are already taking a more concentrated approach to future healthcare treatments tailored to the individual.

This includes genetic testing that reveals the presence of disease long before it would reveal itself and wearable tech gathering data on a phenomenal scale.

Companies making inroads in this area include:

Ultimately, this could go a long way to improving patient outcomes and delivery of care.

The mental health crisis is worsening. The causes are multiple, but sedentary lifestyles and reduced real-life social interaction are part of the problem. Pandemic-induced lockdowns have undeniably compounded this.

The obesity epidemic is another cause of depression, which can be circled back to sedentary lifestyles. This, in turn, contributes to the diabetes epidemic, another problem causing a severe healthcare burden in the West.

A decrease in physical activity was traditionally correlated with aging, but sedentary living has changed this.

Poor social function, depression, and cognitive decline can be linked to a lack of physical activity.

That’s where wearable technology can be hugely beneficial at gathering data on a vast scale and motivating positive behavior at the individual level.

Meanwhile, mental health and social anxiety are being tackled with alternative treatments such as psychedelic therapies and herbal therapeutics.

Telehealth, genomics, AI, and IoT

The arrival of COVID-19 changed the landscape forever, with a particular focus on accelerating technological advancements. This is seen in the rise of telehealth, breakthrough genomics, and disruptive AI.

One remarkable trigger shift that the pandemic has brought about is the acceptance of synthetic messenger RNA (mRNA) vaccines. This is an early venture into genetic modification and could lead the way in developing life-changing treatments that can completely cure and eradicate certain genetic diseases.

Using the CRISPR gene-editing technology system, RNA can be engineered to eliminate or edit a gene. It is already in trials for curing sickle cell anemia.

Meanwhile, the Internet of Things (IoT) combined with artificial intelligence and smart devices is bringing the cutting edge of healthcare into our homes.

Indeed, the IoT can potentially lower the costs of operational and clinical inefficiencies by $100 billion a year.

With the S&P 500 approaching all-time highs and bullish sentiment around healthcare, there’s good reason for investors to take an interest in this lucrative sector.

A $7.8 trillion market

The world spends over $7.8 trillion on healthcare. Shockingly, $3.5 trillion of that is spent in the United States alone. This is expected to continue growing, making it an exciting area to invest in. In fact, global healthcare spending is expected to exceed $10 trillion by 2022.

While we haven’t yet eradicated the virus, the way modern medicine has tackled it is incredible.

There’s no doubt the vaccine producers have done a phenomenal job in creating vaccines in record time.

Not long after the virus was discovered, China published the genome. That in itself is remarkable, but within 48 hours, Moderna (NASDAQ: MRNA) had a full-blown design for the vaccine. Getting through the red tape of the FDA and CDC took a further eleven months to bring it to market, but nevertheless, the breakthrough is outstanding.

There are many healthcare stocks to invest in directly, from large-cap Big Pharma stocks through mid-cap, small-cap, and micro-cap. You can invest in specific areas of health or take a generic approach with exchange-traded funds (ETFs). We reveal some interesting names operating in the space.

Furthermore, you’re sure to enjoy our case study on two interesting investment opportunities. One is a top blue-chip healthcare stock, and the other a lesser-known small-cap.

Navigating the great divide

The pandemic, combined with modern media outlets, has opened the floodgates to misinformation and differing opinions. This has created a great divide.

Millennials have a different attitude to the existing healthcare system than their parents. This is partly due to a rise in their use of telehealth and online resources, along with greater awareness of the unfair aspects of the current system.

Younger generations believe insurers and big pharma have too much power and healthcare costs are too high. This could increase lobbying against the system and bring more disruption to the sector.

Additionally, government regulation could block progress.

The Centers for Medicare & Medicaid Services (CMS) is responsible for laboratory oversight. The Food and Drug Administration (FDA) is responsible for kits and information. While the Federal Trade Commission (FTC) is accountable for marketing supervision.

With oversight spread between departments, it complicates the approval process companies must go through. Plus, with genomics still in its infancy, fear of the unknown may prevent advancement.

COVID-19 has entirely changed the way people work, and employers are under pressure to keep their employees safe and happy. Companies will likely continue expanding employee benefit schemes to include critical illness coverage, fitness centers, subscriptions, or access to convenient care retail clinics. They are also offering high-deductible health plans, which shift some of the costs to employees.

Indeed, the financial side of the US health sector is due a major shakeup, and seismic changes are underway.

Healthcare is a complex and eventful sector. There are many avenues of investment opportunity to explore, and innovation is exploding across a spectrum of possibilities with the potential to transform the face of medicine.

Priorities are shifting

The US healthcare industry is a vast sector, employing more than one in eight Americans. Like any industry, healthcare is constantly evolving, but the COVID-19 pandemic has shifted priorities and shone a spotlight on some of the world’s most innovative projects.

This is accelerating development in areas of health that may otherwise have taken decades to come to fruition.

Furthermore, private equity investment in healthcare is soaring. Vast quantities of uninvested capital have already been allocated to private equity funds. Additionally, rising healthcare spending and COVID-fueled market disruption are all powering private equity interest.

All-in-all, the healthcare sector is one of the world’s biggest and fastest-growing industries. It accounts for more than 10% of the GDP of most developed nations. Therefore, healthcare is a major contributor to a country’s economy.

With the COVID-19 pandemic shaking up the healthcare sector, never has there been a more poignant time to invest.

According to the BDO Center for healthcare excellence & innovation, 70% of healthcare organizations intend to increase spending on digital investments. Furthermore, 93% of healthcare organizations already have a digital transformation strategy underway or in place.

The digital technologies included are:

BDO 2021 HEALTHCARE DIGITAL TRANSFORMATION SURVEY

Meanwhile, the use of robotic surgical equipment is also growing.

The developments in next-generation medicines are outstanding. Healthcare is a fascinating and hugely rewarding sector to invest in.

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Topics:
Healthcare Distributors
Healthcare Providers and Services
Covid-19
Industries:
Healthcare

Author: Kirsteen Mackay

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Kirsteen Mackay does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.

Kirsteen Mackay has not been paid to produce this piece by the company or companies mentioned above.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.