Health care is not the top sector this month in the S&P SmallCap 600, but there are a number of names within the sector that are performing better than the rest in the new year. A few small health care consultants, in particular, are exhibiting leadership.
HealthStream (HSTM) is a stock I've been tracking for quite some time, and it continues to show technical strength. The company provides Web-based training for hospitals and doctors' offices.
It's been getting solid support above its 10-week average since October and has shown no signs of slowing down. While it's a positive that institutional investors have been accumulating the stock, a sustained run-up often means it's time for a break.
The stock did pull back along with the market during the summer and autumn, but not far enough to undercut prior lows.
This is a small cap, with a market capitalization of just $473 million. It moves about 263,000 shares a day, on average. The company reports earnings next month, and earnings season, as always, could bring surprises, either up or down.
I like this stock at the moment, but it's lengthy rally, along with analysts' view that 2012 earnings will slow, gives me some reason to be cautious.
National Research Corporation (NRCI) is another small stock from the health care consulting field. The Nebraska-based company offers performance-measurement services to health care providers.
This is a small stock, with a market cap of only $252 million, and it trades a minuscule number of shares, just 4,600 per day. That makes it extremely risky, from my perspective.
As you'd expect, the stock sports some volatile trade. It's been working its way out of a five-month consolidation, and appears to be forming a handle area. While that kind of price action is often constructive, the lack of liquidity in this stock means that it, too, needs to be handled with care. It's not uncommon for small, thinly traded names to rocket higher but pull back just as fast.
Team Health Holdings (TMH) went public in December 2009 at $12. It's now trading between $19 and $20 after falling hard this week.
The stock had been attempting to crawl out of a sharp correction that began in July. This is an especially volatile stock, with a beta of 1.23. It fell 7.4% on heavy volume Monday and lost more ground on Thursday. It ended Thursday's session at its 200-day line. There's clearly a lack of confidence in this stock at the moment.
As a recent IPO that's expected to keep growing its earnings, Team Health may have some potential ahead, but this small-cap may need some more time to find its footing. Despite its solid price performance in recent months, the sharp retreat this week indicates that volatility is very much a concern.
A final small-cap health care name that has amassed a solid track record of price growth lately is The Advisory Board Company (ABCO). Similar to HealthStream, the stock has been traveling higher along its 10-week average. It closed Thursday almost 3% off its all-time high of $76.73, reached last week.
The Washington, D.C.-based company develops best-practices benchmarks for health care clients, using industry data it collects and analyzes.
The stock is currently in a technical buy range. Buying volume was strong before the holiday season, a good sign. Fundamentally, the company has potential, with analysts seeing earnings growth in the next two years.