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The Health Care Safe Haven of Every Stock Market

1 September 2006 - Features - Editor

Every portfolio needs as much secure return as possible, especially when the stock market waters are choppy with storm clouds on the horizon. Fortunately, there are a number of sectors that offer such nourishing shelter, and health care rank amongst the most secure of them.

No stock market offers guarantees against risks, and health care does carry grave ones, though probabilities of occurrence are low. Obsolescence, either due to new patents and regulatory approvals, or because of changes in epidemiology, can reduce brands that produce billions of dollars in revenues, to shambles. Margins drop like stones on patent expiry, and product liability always looms large.

However, disease is part of life. Most cures have side effects and the march of human progress seems to make us ever more vulnerable to illnesses. Diabetes and blood pressure are examples of lifelong attachment to therapeutic groups, and branding is always secure in when life itself is at stake. Demand is most often inelastic to prices, and rich countries such as the U.S. have no qualms about paying exorbitant premiums.

Pharmaceuticals have long track records on the stock market front, but diagnostic equipment and medical devices make the most amazing technological strides by the day. The best companies have considerable marketing competence, and manage generics for volumes and profits. Nutrition supplements and over-the counter brands bring research based companies in to the high profile arena, and add to growth dimensions. Though computer modeling and operations research have increased the flow rates of new products, innovation in research remains an entry barrier.

Companies with staggered patents, rich pipe lines of research, international presence and dominant shares of important therapeutic groups are always worthy of support regardless of short term stock market conditions. The business sector generally flies above turbulence, appreciates steadily and pays handsome dividends in every sense of the term. New enterprises in the biotechnology space, often founded by technical specialists, have set a new trend during the past decade. Their specialist work and discoveries are often irresistible for top pharmaceutical leaders, with grand appreciation all around. It does appear that the entire health care sector has opportunities and prospects which are rare by normal stock market standards.

 


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