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Health Care Stocks 2010

Written By Brian Hicks

Posted January 21, 2010

Ted Kennedy must be rolling over in his grave. Holy utopia, foiled again.

A mere five months after being buried, his “cause of a lifetime” now hangs in the balance by the power of his very own seat — which, by most accounts, was entirely unimaginable just a few weeks ago.

Yet in the aftermath of Tuesday’s election, the improbable became reality as Scott Brown bolted from a 30-point deficit to defeat Martha Coakley, a candidate most observers considered a shoo-in.

Instead, it was Brown who won the day — and tapped into voter outrage with the “business as usual” bit that has done nothing but bury us.

Armed with the specter of an out-of-control government, Kennedy’s old seat turned out to be nothing more than easy pickings for the upstart challenger.

But that’s mood these days as more and more people begin to realize just how badly they are being screwed by the political machine south on the Potomac.

You see, while at times our right to vote can seem irrelevant, when done in force it can change the political landscape in a nanosecond.  

Right or left, that has given incumbents plenty to worry about as they scurry to save their own smug butts from a similar fate.

The tide is rising and it’s not exactly in their favor.

That has left the same health care bill for which Kennedy fought twisting in the wind, since Brown has vowed to vote against the package and the Democrats may not be unable to shut down efforts to delay its passage.

Health Care Stocks for 2010

Those are the political realities that help make health care stocks a good bet in 2010; it’s becoming more apparent that the health care overhaul is now perched on the slippery slope.

Because while the health care business would have gained new revenue from the added number of customers, the bill being considered by Congress also carries with it the risk of higher fees, increased regulation, and narrower profit margins.

And needless to say, all these factors are murder on bottom lines — especially when the government is involved. After all, Uncle Sam’s ham-handed approach to practically everything is rarely business friendly…

So it wasn’t really all that surprising when health care stocks went on a tear on Tuesday as Brown prepared his victory speech.

In fact, the S& P 500 Managed Health Care Index — which tracks the top six insurers — gained 3.7 percent, almost tripling the S& P 500’s gain on the day. What’s more, the S&P 500 Pharmaceuticals Index also rose 2.2 percent on the news.

But let’s face it; even without the big win by Scott Brown on Tuesday night, there are 78 million other reasons to invest in health care stocks.

Pitch forks and torches aside, when you add the prospect of an army of graying baby boomers into the mix, the long-term growth outlook for health care stocks is practically a no-brainer. Which is one of the reasons we especially like biotech stocks as the top sector of the next decade — especially those involved in regenerative medicine.

In fact, according to recent projections by the federal government, consumers and taxpayers will spend more than $4 trillion on health care by 2017 as our population continues to age.

The result is that health care spending will increase by 6.7% annually over the next nine years, outpacing inflation by nearly three times, according to the forecast.

In fact, it is estimated that by 2017 health care spending will cost an estimated $13,101 per person, versus today’s average cost of $7,026 per person.  

Better yet, the health care share of gross domestic product (GDP) is expected to increase throughout the period, reaching 19.5 percent of GDP by 2017.

2 Health Care Stocks to Add to Your Radar

That, needless to say, will provide the type of environment that will keep health care companies growing — no matter who is in office.

Considering these factors, here are two ways to play these trends, while earning a nice dividend along the way:

  •  Go Long Johnson & Johnson (NYSE: JNJ):  This is one great company with the demographic tide completely on its side. Moreover, their dividend history is as solid as it gets and is growing. Currently the dividend yield is 3.0%. Warren Buffett, by the way, is among its biggest holders. Buy this one on a pullback.


jnj stock chart



  • Go Long Abbott Laboratories (NYSE: ABT): Much like JNJ, Abbott Labs is a diversified health care giant with the wind at its back. On top of that, the 120-year-old company pays a 2.90% dividend and is expected to increase its sales 8% this year to $33.1 billion. This is another one to add on a pullback.
abt stock chart


So whether you are right, left, or somewhere in between, that shouldn’t stop you from adding diversified health care stocks to your portfolio… long-term, these stocks are certain winners. Besides, the markets always tend do well when gridlock arrives in D.C.

As for me, I love it when the voters rise up and shake politicians by the collar. After all, we’re not just citizens, but heirs to the revolution.

Shaking things up once in awhile is our birthright.

Your bargain hunting analyst,

 steve sig

Steve Christ

Investment Director, The Wealth Advisory

P.S. No matter which way the ball bounces in the health care debate, the biotech bull market simply cannot be stopped. In fact, I’ve discovered a biotech stock that is guaranteed to make 66% by May 1st. To learn more about this opportunity, click here.