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Macro Minute:

The macro economy has gotten spicy. The Euro is teetering around $1 USD, there is a massive energy shortage in Europe with maybe the most notable country being Germany, the United States keeps sending money abroad and is giving Americans breaks on expenses (i.e. student loan forgiveness), the Russia-Ukraine conflict is persisting, and the potential for a China-Taiwan conflict is growing. I’ve seen a lot of Twitter spaces and people in “fintwit” believe that inflation has peaked, but I believe we are far from it. I believe we are in a slight run up before another big downturn. I see way too many potential geopolitical and macro events that could keep this global recession going. I do not see any progress where I believe these issues will be resolved quickly or in a timely manner.

Sector Description: What is the Technology Industry?

The healthcare industry has been at the forefront of the news in the past two or so years with the COVID-19 pandemic. Healthcare spending has increased drastically due to the pandemic, but even before the pandemic broke out, NHE predicted the health share of the economy to rise from 17.7% to 19.7% in 2028. Healthcare spending is increasing and more people are becoming reliant on healthcare. Healthcare can be defined as anything from insurance companies, retail stores, hospitals, and essentially everything surrounding health EXCEPT for biotechnology companies. With the increasing need of everyday healthcare, more companies are popping up and, for better or worse, the industry is steadily growing.

Large Public Companies in the Sector

UnitedHealth (Ticker: $UNH) - Market Cap: $482.9B

CVS Health (Ticker: $CVS) - Market Cap: $130.5B

Elevance Health (Ticker: $ELV) - Market Cap: $115.6B

Opportunities for Broad Exposure

There are plenty of opportunities to get broad exposure to this industry. One of the highest rated for 2022 is the iShares U.S. Healthcare ETF. You can find out more about this ETF here.

Key Metrics and Considerations

Consistent Profit: There has been a recent push in healthcare spending and healthcare companies have been benefitting. I’m looking for a constant increase and a recent jump in profit. The COVID-19 pandemic might have hurt some companies initially, but I’m looking at healthcare companies to recover faster than most industries.

Moat: I’m going to define moat slightly differently for the healthcare industry. A moat in the healthcare industry might be large corporate clients (health insurance companies), offering a certain product that is a necessity, or a large retail footprint. Corporations rarely switch insurance providers, if there are doctors, products, or services that are in a certain geographical location as long as that area is sustained, and lastly if there is a large retail footprint people will go. People are creators of habit and will not change those habits as long as there is not a dire necessity.

Sustainability: This is similar to the first two metrics but if there is a moat and consistent profit there needs to be a way for the company to sustain that. The sustainability can be cash reserves, development of new products in that same area with the moat, or something else that I am not currently thinking of. Generally speaking, there will not be too many large increases in these healthcare companies. There needs to be steady and sustainable growth for your investment to be considered good in this sector.

Opinion of Sector

The healthcare industry is one I’ve had a tough time figuring out. There always seems to be healthcare and biotech companies that explode for a day or two when there is some big news, whether it is FDA approval of studies or positive results of studies, etc. Personally, I am staying away from this sector unless it is a potential big retailer (i.e. CVS, not financial advice and I do not currently own) because I believe there are so many factors and it is not an industry I understand fully. It seems like there has been a massive push with government spending and people worrying about their health, so although I’m tentative to actually get in this industry I am bullish on the sector.

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