Is Hospital Investing the Next Big Thing?
Have you ever wondered how to get in on the phenomenal growth of the health care industry?
Even though the political situation with the Affordable Care Act is in limbo right now, the medical, and especially the medical tech industry, is inundated with venture capitalists, hospital corporations and hi-end tech startups that desperately need funds.
For investors who don’t mind taking some risks, this sector is ripe for profit-making.
There are essentially three ways to get in on the investment side of the activity.
One is through investment firms that only allow accredited investors. The good news is that many of these firms are beginning to loosen their requirements and are expected to welcome non-accredited investors within the next year or two.
Two other ways that are already open to non-accredited investors are a few crowdfunding vehicles and direct purchase of hospital stocks and ETFs.
Hospital Strategic Ventures on the Horizon
An emerging and apparently recession-proof, alternative form of investment is already transforming the health care industry. Hospital strategic ventures are startups that focus on medical technology. In the first half of this year, this new form of financial entity racked up $6 billion in revenue.
With rapid advances taking place in the health care tech field, hospitals sometimes are unable to keep up with all the equipment needed to perform their primary job of keeping people healthy. Now, an informal sort of joint venture comprised of health care systems, venture capitalists, and hospitals are funding many of the newest and most promising tech startups.
While venture capitalists and major hospitals are the main sources of funding for these new organizations, there is a place for average investors as well.
These small, usually single-product manufacturing companies can easily gobble up funds at an astounding rate, such is the cost of research and development in the field.
For now, the only way into this lucrative investment niche is via a direct connection with a venture capital firm, which means “accredited investors only.”
Companies like Angel Kings, which primarily backs biotechnology and medical science-related ventures, is just one of many such VC entities that welcomes accredited investors.
Crowdfunding Hospitals and Medical Tech Firms
RedCrow: Investment crowdfunding platform RedCrow is one of the newest entrants into the health/hospital/med-tech field. When the company first came into existence last year, they were only allowed, by SEC regulations, to accept accredited investors, but things have changed. Due to an early management mission of opening up to non-accredited participants, RedCrow expects to be ready for this new form of fundraising early this year.
RedCrow calls itself a “health care equity niche” funding platform that focuses on a vetted portfolio of industry startups. Even after they get the green light for non-accredited investors, RedCrow will continue to have specific offerings for both groups.
MedStartr: While RedCrow waits for SEC approval for its high-end projects, there is a way for anyone to get involved in this kind of funding via MedStartr, a crowdfunding platform that exists solely for the health care industry’s smaller projects. Founder Alex Fair began his ambitious project on Kickstarter but never got off square-one because the KickStarter managers told him about their prohibition on medical and health care fundraising.
The result was his own venture, along with a former business partner, that dealt only with health care projects that needed funding, and which were open to anyone with a few dollars to put into the effort.
While high-tech, hospital crowdfunding opportunities are hard to come by, look for this niche to explode in 2018 when dozens of companies open their platforms to all investors, regardless of income.
MedStartr is to the health care field what RealtyMogul is to the real estate industry: a sensible, simple platform that lets anyone take part in an exciting and potentially profitable part of the economy.
The Best of the Best Hospital Stocks and ETFs
If you’re not keen on crowdfunding or trying to get qualified as an accredited investor and join a venture capital project, the simplest way to invest in the health care field is with good old-fashioned stocks and ETFs, both of which perform well even in down-trending markets.
When the Affordable Care Act first passed, the entire medical sector enjoyed a few boom years.
Now that the new tax plan is in effect, those heady days are over.
But, as a sector, health stocks tend to live up to their name: healthy. With stocks at historic highs, some investors are wary of taking on Wall Street issues, but medicine and health companies are among the few types of investments that do well even in sagging economies.
That’s why three of the best ones might be worth a look for 2018.
Select Medical Holdings: In 2017, SMH was a top performer. With a 27-state reach, more than 1,600 outpatient clinics, and 122 hospitals under its control, SMH is one of the major players in the segment. It also has a gigantic subsidiary, Concentra, which runs more than 300 medical facilities of its own.
With traditional hospitals on the decline as doctors more frequently utilize so-called “specialty hospitals,” SMH is set to be the biggest winner from that trend. As of late 2017, most Wall Street medical stock analysts think SMH will lead the pack in the medical field for at least five years.
HCA Health care: Under the control of this medical corporation are some 300 surgical centers and hospitals combined. Operating in 20 states and overseas (in the U.K.), HCA is expected post very healthy earnings for the next five years, hitting well above the 10 percent mark annually.
Tenet Health care: Tenet specializes in acute care facilities, surgical centers and outpatient treatment units. Currently the firm has 570 combined health care units under its control. Analysts consider the stock a good buy at just 11 times its earnings. For the next five years, TH could easily grow at a rate of 20 percent annually.
When it comes to ETFs in this arena, three standouts are Health Care Select Sector SPDR ETF (XLV), Vanguard Health Care Index Fund (VHT), and SPDR S&P Biotech ETF (XBI). All have been solid performers and tend to weather bad times well, as do many hospital/health investments.
To Your Health care
There’s no magic bullet for turning a profit in any sector when the stock market is set to experience an inevitable correction. But the health care field has traditionally been a sound bet for investors who want to put their money where the ups and downs of Wall Street don’t matter as much as they do for many other parts of the economy.