SWOT Strengths > SWOT Weaknesses?
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SWOT Opportunities > SWOT Threats? |
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Leveraged ETF Funds
2x S&P Health Care ETF (RHM)
Inverse 2x S&P Health Care ETF (RHO)
US ETF Funds
First Trust Health Care (FXH)
iShares Health Care ETF (IYH)
Health Care Providers ETF (IHF)
ProShares Health Care (RXL)
Short Health Care (RXD)
S&P Equal Weight Health Care ETF (RYH)
SPDR Health Care (XLV)
Vanguard Health Care ETF (VHT)
Non - US ETF Funds
Emerging Healthcare (EHK)
iShares Healthcare (IXJ)
S&P Intl Health Care ETF (IRY)
Intl Health Care (DBR)
Cancer ETF (HHK)
Cardiology ETF (HRD)
Enabling Technologies ETF (HHV)
European Drugs (HRJ)
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Index of Health Care Companies
Research Report
Health Care Industry Analysis ► (edit / improve) Description: The health care industry depends on the care of health-related services by professionals for the benefit of patients. Medical device markers, insurance companies, pharmaceutical drug developers and government institutions are major participants in the treatment of sick, injured and disabled patients. Valuation Analysis: Based on WikiWealth's Wall Street analysis, this industry is a Hold, but with good potential for short term growth. The Main Street analysis says a Hold, with SWOT strengths much great than weaknesses and SWOT opportunities less than threats. Major threats include government regulation and reimbursement policy inconsistency. Trade Analysis: Some of the main medical hubs include Switzerland, USA, and Japan, while the main health care commodities include advanced plastics, opium and cannabis. Profit Conclusion: Health Care stocks tend to be less sensitive to economic changes. Look for undervalued health care investments at any point in the business cycle. However, biotech, employment staffing and insurance companies may all decrease during recessions for different reasons. Government intervention is another important factor in health care investments, since government spending in health care is a very large portion of overall health care spending. When governments change spending plans, different sub-sectors in the industry are significantly affected.
Investment Impacts (help)
Switzerland Country Analysis ► (edit / improve) Switzerland (CHF) has a highly productive, capitalist economy with political and economic stability. Currency Analysis: Switzerland’s currency is overvalued according to the investment flow analysis, purchase price parity, and interest rate parity. Investor Survey: Switzerland’s economic environment is very favorable for long term economic growth due to high scores on economic freedom, government stability, and significant strengths. Trade Analysis: France, Germany, the USA, and Italy are the top export partners, while the leading industry is financial services. Commodity Analysis: Switzerland does not have significant exports, besides energy. SWOT Analysis: The leading Swiss strength is their traditionally political neutrality, while the main weakness is the long expectancy of their citizens, who could burden the fiscal position of the country. Profit Conclusion: An overvalued currency, low investment flow potential, but favorable business environment leads to a neutral outlook for Swiss investments.
USA Country Analysis ► (edit / improve) The United States (US) has a highly productive, capitalist economy and is the largest and most diverse market in the world. Currency Analysis: the US dollar (USD) has the potential to increase in value especially versus the Australian and Canadian dollar because of the significant potential of undervalued companies (see investment flows analysis). Investor Survey: the economic environment is very favorable for long term economic growth due to high scores on economic freedom and economic diversity. Trade Analysis: China, Japan, Mexico, and Canada are the top US trading partners, while the leading export and import are electrical machinery and vehicles, respectively. Commodity Analysis: The US produces a significant amount of coal and wheat for use at home and as an export. However, the US consumes a larger amount of oil, which contributes to their trade deficit. SWOT Analysis: The leading US strength is its entrepreneurial culture, while the main weakness is high health care cost. Energy independence has the opportunity to propel growth, while the housing crisis may lower growth. Profit Conclusion: An undervalued currency, high investment flow potential and favorable business environment lead to a positive outlook for US investments, which will also benefit from positive international actions.
Japan Country Analysis ► (edit / improve) Japan (JPY), the second largest economy in the world, has an industrial, export oriented economy that benefits from its relationship with the USA and proximity to China. Currency Analysis: Japan’s currency (the Yen) is overvalued according to investment flow potential, the purchase price parity analysis, and the interest rate parity analysis. Investor Survey: Japan’s economic environment is moderately favorable for long term economic growth due to high scores on economic freedom and government transparency, but low scores on the SWOT Analysis. Trade Analysis: Indonesia, China, Singapore, the EU, Korea, and the US are Japan’s top export partners, while the leading industry is industrial manufacturing. Commodity Analysis: Japan imports many products because of its lack of arable land and energy resources. SWOT Analysis: The leading Japanese strength is their education system, while the main weakness is a declining birth rate. A major Japanese threat is the continuation of zombie companies. Profit Conclusion: An overvalued currency, low investment flow potential and moderate business environment leads to a negative outlook for Japanese investments.
Commodity Investment Impact
Plastic Commodity Analysis ► (edit / improve) Plastic is a synthetic material that has a wide area of uses in the industrial and manufacturing industries. Commodity Analysis: Plastic is rated a Hold. Plastic demanders and suppliers have average potential to increase in value. Investor Survey: Plastic’s long term growth potential is moderately unfavorable due to low scores in short supply and substitute products. SWOT Analysis: The SWOT analysis for plastic is incomplete. Profit Conclusion: The commodity analysis hold rating indicates that plastic should stay the same price over the short term, whereas a moderately favorable investor survey means plastic may decrease in price over the long term.
- Health care uses a variety of very high quality plastics to build instruments and devices.
Opium Commodity Analysis ► (edit / improve) Opium is a narcotic derived from opium pods. It contains morphine and codeine and is highly addictive. Commodity Analysis: Opium is rated a Buy, because demanders of the plant have a high potential to increase in value. Unfortunately from an analytical standpoint, there are no publicly traded suppliers of opium; therefore, this analysis is incomplete. Investor Survey: Opium’s long term growth potential is moderately favorable due to high scores on sensitivity to price changes. SWOT Analysis: Strength: Opium has a number of medical uses; Weakness: The drug known as heroin is derived from the production of opium. Opportunity to grow: Opium’s medical uses are growing. This should increase demand for opium. Threat to grow: opium, in a concentrated form, is illegal through the world. Profit Conclusion: The commodity analysis buy rating indicates that opium should increase in price over the short term, whereas a moderately favorable investor survey means opium may increase in price over the long term.
- Opium derivative products are major, but addictive, sources of treatment of patients.
Cannabis Commodity Analysis ► (edit / improve) Cannabis (also known as marijuana, ganja, weed, pot… etc) is mainly used as a recreational drug because of its psychoactive chemical compounds. Commodity Analysis: Cannabis is rated a Buy, because demanders of the drug have a high potential to increase in value. Unfortunately from an analytical standpoint, there are no publicly traded suppliers of cannabis; therefore, this analysis is incomplete. Investor Survey: Cannabis’s long term growth potential is moderately favorable due to high scores on sensitivity to price changes. SWOT Analysis: Strength: Cannabis has a number of medical uses; Weakness: The sale of cannabis produces considerable corruption and violence. Opportunity to grow: decriminalization of cannabis could provide an economic boost to local economies and increase the demand for cannabis. Profit Conclusion: The commodity analysis buy rating indicates that cannabis should increase in price over the short term, whereas a moderately favorable investor survey means cannabis may increase in price over the long term.
- Cannabis is becoming a mainstream drug for the alleviation of some cancer treatment side effects.
Importance of the Industry Analysis? WikiWealth's industry analysis evaluates the major industry characteristics that affect investments within that industry. Company specific factors drive the performance of individual companies, but macro-economic industry factors can affect the performance of entire groups of stocks.
Warren Buffett Quote: "When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact."
No matter the quality of your business, industry economics is an important factor in any investment decision.
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WikiWealth.com Industry Description: The health care industry depends on the care of health-related services by professionals for the benefit of patients. Medical device markers, insurance companies, pharmaceutical drug developers and government institutions are major participants in the treatment of sick, injured and disabled patients. Read More.
WikiWealth.com Profit Analysis: The best way to profit from health care stock investments is to find the most undervalued investments (Wall Street and Main Street buy ratings) during economic recessions. Those investments should be undervalued (see Wall Street Analysis on left side), and have high Main Street Common Sense investment ratings (see Main Street Analysis on right side). When an economic recovery occurs, different sectors of health care stocks will perform better or worse than the general stock market. Consumers generally maintain health care spending during recessions, but don't increase purchases during economic expansions. Eventually other stock investments become overvalued, because profits and stock prices increase past their fair values. During the last stages of an economic business cycle, just before a recession, it is best to buy health care stocks if you must invest in the stock market, because they are the least risky equity investments in a declining stock market. As investors search for safe (less risky) stock investments, they tend to buy health care stocks. Expensive (overvalued) stocks with low Main Street Common Sense ratings should be sold at any time to invest in better stocks. Two buys ratings are the best and two sell ratings are the worst possible stock investments. Click for more information: stock research ratings.
Biotech stocks behave very differently from other health care stocks. Before drugs companies become profitable, they are constantly worried about their cash balance. For unprofitable biotechnology companies, the ability to raise cash is easiest during positive economic conditions, but difficult during recessions; the stock price rises and falls accordingly to the cash raising environment and drug pipeline potential. It is generally unwise to invest in biotechnology companies, because much of what drives the stock price is speculation about the drug pipeline, test results and government intervention. Unless the biotechnology is large and profitable and you have extensive industry experience (10 plus years), the only way to make a non-speculative investment in biotechnology is if you have insider information, which is illegal (see Martha Stewart). Warren Buffett does not own biotechnology companies for these specific reasons.
WikiWealth.com Industry Analysis: Health Care stocks tend to be less sensitive to economic changes. During economic recessions, consumers tend to decrease discretionary expenses to save money, but they can not decrease purchases of health care, because it is needed for everyday living. Spending on health care generally remains constant, because investors maintain their health care coverage, which helps health care stock prices. Health care insurance and related industries could decline during recessions, because unemployed workers decrease health care coverage, which decreases revenue to those stocks.
During economic recoveries, health care stock prices generally under perform the stock market, because revenue and profit growth is faster in companies, which declined the most during the proceeding recession. Health care insurance stock prices may increase as more employees receive health care benefits. During longer economic expansions, health care investments tend to growth at the same rate as the general stock market.
Government intervention is another important factor in health care investments, since government spending in health care is a very large portion of overall health care spending. When the government changes spending plans, different sub-sectors in the industry are significantly affected. To account for this added risk, Wikiwealth.com makes conservative assumptions about revenue, profits and risk.
Biotechnology companies are significantly impacted by specific drugs in their pipeline. If a drug passes different stages along the road to commercial use, then the drug company's stock price increases; the reverse is also true.
| Health Care Industry Financial Statistics |
Stat |
Notes |
| Stock Rating |
Hold |
… |
| Potential (safety margin) |
38% |
… |
| WACC Analysis |
7% |
Low ~ Good for investors |
| Comparative Industry Multiples |
Stat |
Notes |
| Revenue EV Multiple |
2.8x |
High ~ Bad for investors |
| EBITDA EV Multiple |
9.4x |
High ~ Bad for investors |
| EBIT EV Multiple |
12.9x |
… |
| Cash Flow EV Multiple |
12.8x |
… |
| Book Value EV Multiple |
1.0x |
Low ~ Good for investors |
| Discounted Cash Flow |
Stat |
Notes |
| Revenue Growth |
13% |
High ~ Good for investors |
| EBITDA Margin |
26% |
High ~ Good for investors |
| EBIT Margin |
22% |
High ~ Good for investors |
| Cash Flow Margin |
14% |
High ~ Good for investors |
| Taxes Rate |
21% |
… |
| Debt-Equity Ratio |
15% |
Low ~ Good for investors |
| ROIC |
5% |
Low ~ Bad for investors |
| Reinvestment Rate |
13% |
High ~ Bad for investors |
| WACC Discount Rate |
Stat |
Notes |
| Risk Free Rate |
4% |
Low ~ Good for Investors |
| Cost of Debt |
7% |
Low ~ Good for Investors |
| Equity Risk Premium |
5% |
… |
| Debt Required Return of Debt |
5% |
Low ~ Good for Investors |
| Required Return of Equity |
7% |
Low ~ Good for Investors |
1 WikiWealth.com only uses the largest 30 companies in each industry for the basis of these financial measures. Each statistic is the market weighted average of the 30 companies.
2 Investment potential (margin of safety) is a weighted average of the discounted cash flow analysis (DCF), the enterprise value (EV) market multiple analysis, and the Warren Buffett investment analysis. WikiWealth obtains 80% of their quantitative investment potential from fundamental investment analysis.
SWOT Analysis
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