Nowadays, after all the celebrations, it is an excellent time to make your property decisions for the new year. To that end, MDLinx chatted with Travis Johnson, the manager of StockGumshoe.com—a website that sleuths out real-deal data on highly praised stocks—to get some penetration for doctors looking to evaluate their investments in 2020.
For the doctors, here’s some valuable news for making investments in 2020.
Healthcare Division Is Pulled
The healthcare division—which covers everything from health coverage companies and healing device makers to large pharmaceutical stocks and small biotech stocks—has regularly been a safe, protective property to turn to when the business is doing poorly, Johnson stated. But the healthcare business didn’t do too well in 2019, what with news of
Democratic candidates’ plans for Medicare for All, as well as possible medication price restrictions and other factors.
Providentially, the healthcare sector has begun to perk up in the last month or two, according to Johnson.
But before you take your children’s college fund and put it into a brand unique biotech company whose stock is “sure” to pay off a hundred-fold, here’s a word of warning: Scientists don’t make the best investors. (Yeah, we said it, but we’re not the only ones who speak it.) Why do scientists tend to make bad purchase decisions? Because their expertise and authority in the medical field often encourage them to exceed their skills in other areas—like the stock market.
“Extremely professional people often understand that they should be able to outsmart the market. And they have a hard time with the submission that the market forces upon you,” Johnson responded with a sorrowful laugh. “It’s control of your passions that make you a better investor, not a high IQ.”
That brings us to our next point.
The New Business
Physicians usually are involved in the hot new ideas, like the latest biotech stock for a startup business whose single modern medicine is in clinical cases.
“Biotech is an area where you might get large 1,000% results, but it’s also an area where you get a lot of 95% needs,” Johnson stated. “So whenever I believe about a biotech stock—and they get bothered by property newsletters all the time because of that potential of 1,000% profits—I always try to tell myself that the person I’m buying the stock from apparently knows a lot more about it than I do, and knows the science better than I do, and yet they’re willing to sell it to me at that [small] cost.”
One more reason he manages to avoid them: Startup businesses have no business track record. “They’re all pre-revenue businesses because they don’t yet have an FDA-approved good,” he replied.
“I do manage to focus on areas where there are business results you can look at,” Johnson stated. As an instance, he points to Medical Properties Trust (ticker: MPW), a real estate investment trust (REIT) that owns hospital resources. It’s an expense that’s been growing in 2019, but it’s also reasonably stable with regular dividends, he said. Low-interest rates are likely benefitting its performance, too.
Associated with small pharma startups, big pharmaceutical firms (and some large biotech companies) have relatively steady cash flows, dividends, and earnings. But even though these organizations are large, with dozens of medications in their product line, their financial review can still be tough to predict.
If you like pharma properties, though, a more stable option might be an exchange-traded fund (ETF) of big pharma stocks, Johnson suggested, like the iShares US Pharmaceuticals ETF (IHE). An ETF is like a mutual fund because it includes a diversified portfolio of dozens of assets, but it’s also like a stock because it can be purchased easily.
“So, instead of buying one share of Pfizer, you might buy one share of an ETF that holds little pieces of Pfizer, and Merck, and Amgen, and AbbVie, and 30 other big pharmaceutical corporations,” Johnson stated.
“Compared with buying stock in a private company, you do reduce your potential gains because the whole sector is not going to go up by 500% if one of the organizations makes a large development and gets a new blockbuster drug. But at the same time, the whole sector is not going to fall by 50% if a patient dies in a clinical examination.”
Because medical devices often face less risk and scrutiny than new pharmaceuticals, consider advances in medical device funds, like iShares US Medical Devices ETF (IHI), Johnson suggested. Or, for an even broader take, there’s the Vanguard Health Care ETF (IHE), which covers all healthcare companies.
All the properties described above are generally stable with less risk than most stocks. But less risk can also mean less gain. The well-known mantra on Wall Street is: “Don’t spend more than you can manage to lose.” Nevertheless, if you want to spend some money, you can manage to lose, then read on.
“I don’t usually make recommendations, but if I’m investing my money—the ‘play money’—I would want to do something more exciting [than investing in ETFs],” Johnson stated. (“But for my retirement money, I wouldn’t dabble in different stocks or try to make big bets on the next biotech breakthrough,” he replied.)
A couple of individual medical device companies he likes these days:
- Intuitive Surgical (ISRG): “Even though it’s high, we’re minimizing how many surgeries are going to be done with robotic support in the next ten years,” he replied.
- Elekta (EKTAY): “This is a Swedish company that makes combined MRI and radiation therapy machines. They have a new model out that seems like it’s going to sell pretty well next year,” he said.
“Lots of people, including doctors, are controlled with marijuana stocks. But that market has collapsed this year. So, the stocks are more affordable, but there is a constant flow of people trying to find the next big winners,” Johnson stated.
The next million-dollar issue in this sector: Will cannabidiol (CBD) companies be able to market their products as dietary complements? If the FDA rules to allow this, the potential is significant.
“But if they’re not allowed to, then the market will become a lot smaller, because of people like their CBD gummy bears more than they like the purpose of putting a CBD lotion on their arm,” he revealed.