To The Moon

I think everyone needs health care at some point in their lives, or at some point in particular. This has always been one of the defensive areas, after all, no matter how bad the economy is, people will seek medical treatment or professional advice when they need it. If we leave aside the moral controversy, because in the past many people were actually dissatisfied with the pricing of health care, but at the same time it is an investment opportunity for investors.

My personal opinion is that as consumers we have little control over whether health care is affordable or not, because the cost of developing drugs and treatments is rising almost every year, and this is one of the expenses that every country is concerned about. This is outside of most of our expertise and control, and we can only leave it to the government or non-governmental organizations to monitor and control. But I think investors can choose to invest in quality health care stocks as a response strategy, as a "hedge" for their potential future health care payments. Let me give you an example, for example, you can take the dividends from health care stocks to help supplement your medical card insurance. If you have a good eye, the health care stocks you choose will grow over the long term and the dividends will increase, although the medical card fees will also increase, but maybe it will help to relieve and buffer. As for whether it works, I leave it up to the investor to evaluate whether such a strategy is right for them or not.

Let's start by looking at the different types of healthcare stocks listed in the U.S. The industry is actually quite broad, so there are several different types of healthcare stocks. But I can broadly categorize them into four main types.

Pharmaceutical stocks: Pharmaceutical manufacturers focus on developing drugs to treat or prevent disease. Biotechnology companies use living organisms, such as bacteria, to develop drugs, while pharmaceutical companies use chemicals. The number of drug stocks is very large, ranging from large companies with billions of dollars in annual sales to small, publicly traded biotech companies with no products still in development.

Medical device stocks: Medical device companies make equipment used to care for patients. These devices range from disposable gloves and thermometers to high-technology artificial heart valves and robotic surgical systems.

Payer Stocks: This group plays the role of payers, such as health insurance companies and pharmacy benefit managers. I think this area plays a particularly important role in the U.S. health care system. Insurance companies collect premiums from enrollees or employers to cover medical costs, while pharmacy benefit managers administer prescription drug benefits for employers and health plans.

Health Care Provider Unit: This area encompasses the first line of health care services provided to patients, such as hospitals, physician offices, home health care companies and long-term care facilities, among others.

After the four major health care-related categories mentioned earlier, here are the stocks in this area. First of all, it must be stated that these are the U.S. healthcare stocks that I think we can watch in the future, but they do not constitute any trading recommendations, as some of them are still losing money, so investors must evaluate the risk of investing at their own discretion.

Forte Pharma (VRTX) is one of the stocks in the market that stands out from the biotech sector. The company is focused on developing drugs to treat the underlying cause of cystic fibrosis (CF), a rare genetic disease that damages the lungs and other organs. The company's newest CF drug, Trikafta, can increase the number of patients it can treat by more than 50%. The company is also developing drugs for other rare genetic diseases, as well as more common diseases, including type 1 diabetes.

Intuitive Surgical Group (ISRG), a company that develops medical devices, is also in the field of surgery. The company's da Vinci robotic surgical system has been used in more than 10 million surgeries since its introduction in 1999. In the long run, as the population ages and requires the type of surgery that da Vinci is often used for, intuitive surgery companies look to have tremendous growth opportunities.

Novocure (NVCR) markets a new treatment for cancer called the "tumor treatment field". The therapy uses an electric field to disrupt the division of cancer cells. The company is evaluating treatments in clinical studies for non-small cell lung cancer, ovarian cancer, brain metastases and pancreatic cancer. The company is still losing money, but the future may be promising.

UnitedHealth Group (UNH), the world's largest health insurance company, is a leader in health care services. The company's size, stability and dividend make UNH one of the most representative health care stocks in the market.

Health Care Select Sector Index ETF (XLV): This is a passive investment representative ETF for the health care sector, if you do not know which company to invest in and want to simply invest in this sector, you can pay attention to this ETF.

Things to note before investing

The most important thing is of course the catalyst for growth. For any healthcare stock, the company's prospect is the most important. We can look at their business performance in recent years, and although the future does not always reflect the past, we can find some clues and reasons to invest in them. For example, we can look at their growth strategy and potential market size, and then don't forget to look at the companies' competitors to see if they are better than the companies we are currently looking at.

The next step is to assess the financial health of a public company. Let's say a company has started making money and is profitable. If it is still losing money, then we assess whether the losses are growing or narrowing, and finally assess the likelihood that it will start making money in the foreseeable future. Then I think another important item is the company's free cash flow, which is the cash left over after operating expenses and capital expenditures. If a company's free cash flow is higher, then it is in a stronger financial position and will be able to hold up even if the economy goes into a winter.

If you do see a healthcare stock that is worth investing in, the next thing investors must consider is whether the current valuation of the company is expensive or relatively reasonable, as this will affect your return on investment and margin of safety. Of course everyone has their own ruler and judgment on valuation, but my personal standard is that a high PE stock must ensure that its growth is also relatively high to be reasonable, otherwise low growth rate but high PE actually does not meet my standard. If the dividend yield is relatively low compared to the U.S. Treasury yield or regular, plus the future growth can be almost flat, then it can actually be considered a very high valuation.

I believe that investing in any industry has its own risks, and I think we can all agree on that. Investing in health care also has potential risks. For example, if a competitor may develop more successful products and services, then the healthcare stock will be at risk, or even become an industry-wide risk. In addition, the health care sector is highly regulated by government agencies. Pharmaceutical and medical device manufacturers may sometimes fail to obtain approval to market new products, and even if they do, future regulatory changes could significantly alter the growth prospects for healthcare stocks. The U.S. Food and Drug Administration (FDA) is the regulatory agency responsible for overseeing pharmaceuticals and medical devices. Personally, I think it's good to have this agency as a gatekeeper, both from an investor and consumer perspective. However, I think many health care stocks also seem to be at great risk of litigation. For example, biopharmaceutical companies, medical device manufacturers and health care providers could all be sued if a patient believes that a company's products and services have caused them harm.

Finally, I believe that while there is some risk, as there is inevitably in investing, I believe that competent management will manage the risk and minimize it. Moreover, if we take a long-term view, the overall outlook for the healthcare sector is quite optimistic. After all, the aging of the population around the world is a definite trend, and with the advancement of medical technology today, it should bring huge opportunities for the healthcare sector in the future, providing better medical options and medications for patients, as well as a significant return on investment for investors.

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