Healthcare is in the news. That is not unusual, but some interesting statistics have just come to light, especially relating to the Affordable Care Act (Obamacare). Recently, the The New York Times reported "about 10 million more people have insurance coverage this year as a result of the Affordable Care Act." The Times also reports that subsidies made available by the law lowered the cost of medical insurance for "most people," although some Americans saw their premiums rise.
While the healthcare industry faces some uncertainty, overall it is doing reasonably well. I have found three companies, each engaged in different aspects of healthcare, which are worth thinking about as investments.
All three are recommended by the strategy I created from the writings of legendary mutual fund manager Peter Lynch, who described his approach to investing in a best selling book, One Up on Wall Street. In that book, Lynch talked about the importance of the P/E/G ratio, which is price-to-earnings relative to growth. Using this ratio gives the investor a means to measure how much he or she is paying for growth. A P/E/G of 1.0 means that at the stock's current price, the investor is paying $1 for each percentage point of growth. A P/E/G of 1.0 is the maximum Lynch wants to pay for a stock. In addition to the P/E/G, Lynch considered other variables, such as total debt relative to equity (for non-financial companies), and he does not want to see this ratio being high.
One healthcare-related company favored by my Lynch-based strategy is Lannett (LCI), which is a maker of generic drugs. The company's P/E/G is a desirable 0.72, and debt is exceptionally low.
Anika Therapeutics (ANIK) develops and manufactures products for the protection, healing and repair of tissues based on hyaluronic acid, a naturally occurring polymer found throughout the body. This acid coats, protects, cushions and lubricates soft tissues. Anika's P/E/G is an uncommonly low 0.37, plus, and it is debt-free.
Aetna (AET) is one of the country's largest managed healthcare insurers, with over 20 million members. The company's yield-adjusted P/E/G is 0.91. Being a financial company, rather than look at the debt-to-equity ratio, the Lynch strategy focuses on the equity-to-assets ratio, which has to be 5% or above; Aetna's is a robust 28.0%.
Boost your portfolio's financial health by taking advantage of any or all of these healthcare-related companies. They are solid performers with well-priced stocks.
