Only a few weeks ago, I wrote that this could be the most dangerous time ever to invest in healthcare stocks. I wasn’t exaggerating. There has never been as much serious discussion about implementing a single-payer healthcare system in the U.S. With around half of the 2.8 million Democratic presidential candidates (give or take a few) promoting Medicare for All, many healthcare stocks could be skating on thin ice.
But there are some healthcare stocks that I think should perform really well over the long run regardless of what happens with U.S. healthcare reform. Three healthcare stocks that I’d buy right now without any qualms are Illumina (NASDAQ:ILMN), Teladoc Health (NYSE:TDOC), and Guardant Health (NASDAQ:GH). Here’s why.
Illumina is the 800-pound gorilla in the genomic sequencing industry. The company’s technology has paved the way for drastically cutting the costs for mapping a human genome. Illumina has continued to innovate, with its relatively new NovaSeq system driving significant sales growth for the company over the last year.
But we’ve only scratched the surface for the potential of genomic sequencing. Illumina CEO Francis deSouza listed several important statistics in his comments at the J.P. MorganHealthcare Conference earlier this year. He noted that fewer than 0.01% of animal species have had their genomes sequenced. Fewer than 0.02% of human genomes have been sequenced. And fewer than 1% of variants in the human genome have been fully characterized.
Several trends should benefit Illumina for many years to come. Consumer genomics products such as Ancestry and 23andMe kits have been big in the U.S. for genealogy purposes, but have lots of growth prospects in international markets and in identifying genetic health characteristics. Demand for noninvasive prenatal testing (NIPT) continues to rise. The biggest opportunities, though, lie in the research and treatment of diseases, especially rare and undiagnosed diseases.
Illumina makes most of its revenue by supplying consumables used in sequencing. As the use of genomic sequencing becomes more widespread, I expect Illumina’s recurring revenue will snowball, enabling the company to pour even more money into innovation to maintain its competitive position.
2. Teladoc Health
Teladoc Health is the clear leader in its market, too. That market is telehealth services. Over 12,000 clients use Teladoc Health, including around 40% of the Fortune 500.
There are plenty of companies that offer telehealth services. But…
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