While the pandemic may not stick around, attitude changes might
Given all the talk surrounding the novel coronavirus and its multiple variants, it’s quite clear that Americans are suffering not only from the global health crisis but also from pandemic fatigue. As the concept of retail revenge demonstrates, people don’t want to live in fear anymore. Nevertheless, what may be a permanent impact of Covid-19 is attitude changes that affect healthcare stocks.
A few months after the coronavirus first breached our borders, the National Health Council reported that a survey conducted in early May of last year revealed that 72% of U.S. consumers changed their usage of traditional healthcare services. Not surprisingly, 41% of respondents delayed health-related services, while 38% stated that they intended to delay future care. Obviously, that imposed a dark cloud on many healthcare stocks.
At the same time, this dynamic represented a boon — albeit a cynical one — for companies levered to the burgeoning telehealth market. In fact, a McKinsey & Company report in June of this year acknowledged that care providers must provide options to prospective patients as people will delay medical service if they don’t feel comfortable or safe. Therefore, integration of telehealth will be a relevant component of healthcare stocks overall.
But it’s not just telehealth that’s benefitting from a broader rethink. McKinsey also reported that the “crisis has had an impact on how consumers think about the healthcare plans they are using and purchasing.” Some of the thought processes that are going on are not necessarily positive, so there’s an incentive for insurance providers to up their game. This too will affect investments in healthcare stocks.
Further, health doesn’t just revolve around physical needs. Alarmingly, self-harm increased during the pandemic in some instances, particularly among the Black population, according to a report from Johns Hopkins Medicine. Thus, demand for healthcare stocks stems from holistic needs, hence the diversity of names below that can rise in the post-pandemic period.
- Pfizer (NYSE:PFE)
- CVS Health (NYSE:CVS)
- Abbott Laboratories (NYSE:ABT)
- Talkspace (NASDAQ:TALK)
- American Well (NYSE:AMWL)
- Ginkgo Bioworks (NYSE:DNA)
- Welltower (NYSE:WELL)
While there’s a temptation to think that the coronavirus impact is a one-off deal, this time really might be different. The Covid-19 crisis is still an ongoing threat — and we’re unlikely to forget it anytime soon. Therefore, these healthcare stocks could have remarkably long legs.
Healthcare Stocks to Buy: Pfizer (PFE)
In the immediate term, Pfizer isn’t exactly having the best time in the market. Since closing at a high of $50.42 on Aug. 17 of this year, shares have slipped 13% heading into the third weekend of September. Based on the technical volatility, it’s very possible that PFE could have further to fall. Nevertheless, Pfizer has been one of the biggest winners among healthcare stocks.
Obviously, it has been the go-to name in terms of the vaccination rollout. However, I think it’s more than that. As one of the pioneers in nucleic-acid-based technologies — specifically the use of messenger RNA — Pfizer and its biotechnology partners have proven the efficacy of groundbreaking vaccine research and development. Best of all, Pfizer along with partner BioNTech (NASDAQ:BNTX), received approval for its solution by the Food and Drug Administration — a first for an mRNA vaccine.
Is PFE therefore a buy on the possible continuation of the Covid-19 crisis? Possibly but that specific narrative for healthcare stocks could be waning. Instead, I like the forward-looking potential for Pfizer to respond to the next global health threat. Certainly, the company has the tech to do so.
CVS Health (CVS)
Back in November 2018, CVS Health — one of the top retail pharmacy and healthcare stocks — made the announcement that it completed its acquisition of insurance provider Aetna. At the time, CVS stated that through the combined enterprise, its “Care delivery will have a local focus that will make a complicated system simpler for all, helping people achieve better health at lower cost.”
While an appealing concept on paper, the market wasn’t exactly pleased with the move. By the following spring, CVS stock was mired in the doldrums. But because of the Covid-19 crisis, the Aetna acquisition has proven to be either prescient or fortuitous.
Either way, StockMarket.com contributor Jonathan Phillip had the following to say about CVS’ future ambitions:
“In August, it announced an innovative health care solution, Aetna Virtual Primary Care. It is designed to revolutionize the primary care experience and make it easier and more accessible for people to get their health services. Eligible members will have access to a panel of board-certified physicians and coordinated care based on their health needs. With this now available, consumers will be able to balance the demands of work and health more effectively.”
Because people are reconsidering their coverage options, CVS could be a long-term beneficiary among healthcare stocks.
Healthcare Stocks to Buy: Abbott Laboratories (ABT)
One of the quiet beneficiaries out of the healthcare stocks that received a Covid-boost, Abbott Laboratories is currently stuck in an extremely awkward situation, to put it mildly. In August, an unflattering New York Times piece described how the company’s Covid-19 testing kit division requested employees to trash the products they worked hard to create.
In some ways, the about-face is understandable: Covid cases plummeted in the spring, leading Abbott to take drastic measures to avoid being stuck with unsellable inventory. As the Times stated, this move is proving to be untimely, “hobbling efforts to expand screening as the highly contagious Delta variant rages across the country.”
Still, you can also look at the situation as a glass half-full. Demand has skyrocketed for Abbott’s 15-minute antigen test, demonstrating its popularity. Should another similar crisis emerge — or if we have additional variants of the SARS-CoV-2 virus — Abbott’s testing and diagnostics acumen should prove valuable to investors.
Also, the company has other non-Covid-related catalysts, such as its continuous glucose monitoring devices for diabetes patients. ABT’s generally steady rise higher provides confidence for prospective buyers to hold true to shares.
As one of the most speculative healthcare stocks, I want to be very clear about the risks betting on Talkspace. The underlying volatility of its equity unit is unpredictable and if anything, TALK stock is tilted in a decidedly negative trend at the moment. So you should only invest what you can afford to lose.
That said, mental health has always been an important topic, especially recently due to myriad societal and economic pressures. Even before the Covid-19 crisis became a thing, academic institutions reported on the worrying decline in U.S. life expectancy. Of course, this dynamic represents a perplexing contradiction: we’re the richest nation in the world yet our citizenry is dying at an unexpectedly high rate.
But with the pandemic, this circumstance has worsened significantly. In February 2021, Nature.com reported on scientists tracking a surge in depression with the crisis taking a mental health toll. Moreover, the situation isn’t limited to the U.S. but across the globe.
That’s why Talkspace offers a vital business model, providing mental health support and services for individuals, couples and teens. Additionally, the company provides psychiatric services. Best of all, people can reach out on their phones, thereby providing convenience and a physically safe environment.
Healthcare Stocks to Buy: American Well (AMWL)
At the start of the pandemic, multiple healthcare stocks took a hit for understandable reasons. Frankly, visiting a clinic or hospital was the last thing anyone wanted to do unless they had a life-or-death emergency. Making matters worse was that the SARS-CoV-2 virus targeted people who were immunocompromised. This circumstance put those who suffered from chronic disease in between a rock and a hard place.
The one bright spot in this mess? The rise of the telehealth industry, which blossomed thanks to its ability to receive contactless medical guidance without the need to visit a possibly compromised facility. In addition, let’s not forget about the medical doctors who have championed telehealth during this crisis. It’s not like they want to expose themselves to Covid either.
However, with the gradual acclimatization to the pandemic, the narrative for telehealth-related healthcare stocks took a massive blow. Still, over the long run, this could turn out to be a long-term bullish opportunity. According to aforementioned data, telehealth may become a permanently relevant component of our care infrastructure moving forward.
That’s why if you can stomach volatility risk, you should check out American Well. With both its telehealth services combined with contactless psychiatric care, AMWL is attractively positioned to rise in the post-Covid environment.
Ginkgo Bioworks (DNA)
One of the recent initial public offerings that I covered in my work for Benzinga, Ginkgo Bioworks specializes in a paradigm-shattering innovation called synthetic biology. Essentially, this practice increases the efficiency and speed of biochemical processes in a cell, offering radical and unprecedented solutions for biologics-related endeavors.
For instance, spider silk has always been a revered commodity for its ultra-thin profile and incredible strength. However, through synthetic biology, it’s possible for bioengineers to instruct specialized microbes to manufacture spider silk in quantities which would otherwise be impossible. Certainly, it’s a more palatable option than collecting a bunch of spiders to do their business.
Better yet, Ginkgo’s specialty doesn’t revolve around science-fiction-sounding aspirations. As I mentioned for my Benzinga piece, the company already played a pivotal role in protecting Americans. While most attention is paid to Moderna (NASDAQ:MRNA) for developing its Covid-19 vaccine, Ginkgo helped optimize enzyme production to accelerate said vaccine’s production.
Finally, Ginkgo has a biosecurity business, which involves using advanced analytics to “help flag genetic sequences with manmade signatures while leveraging artificial intelligence to distinguish between unnatural and organically evolved viruses.”
Yes, it’s an IPO based off a reverse merger with a special purpose acquisition company, but this could be one of the most important healthcare stocks in the biotech realm moving forward.
Healthcare Stocks to Buy: Welltower (WELL)
On a technical level, Welltower might not appear on many lists regarding healthcare stocks because the company is structured as a real estate investment trust. Nevertheless, it’s very much a healthcare play, specializing in senior housing facilities and post-acute care provider services. Already relevant from demographic dynamics, the pandemic has forced a rethink in elderly care.
Because the SARS-CoV-2 virus has been a particularly pernicious threat to older folks, a harsh spotlight fell on the senior housing industry. Following various controversies of mismanagement and neglect, the sector should improve for the better due to public outrage. It’s about time because let’s face it — there’s nothing in the world that can prevent aging.
Further, Welltower’s underlying market will benefit from an unprecedented demand surge. The latest data shows that more than 75 million baby boomers are planning to retire sooner rather than later, which will have a profound impact on multiple social segments, particularly the workforce.
Of course, as those boomers enter their twilight years, many will enter senior care facilities. Therefore, WELL has a very attractive long-term catalyst.
This article appeared at InvestorPlace.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.