Why is the healthcare industry a great place to find investments right now?
There are tree major reasons. First, spending on healthcare in the U.S. is growing rapidly. The industry already accounts for more than 17% of the economy and is expected to expand by 5.8% a year on average through 2033, when it should account for more than a fifth of the economy.
Second, the healthcare industry is widely considered to be recession-proof, or at least highly recession-resistant. Historically, the sector has fared well during recessions, as people need healthcare and find ways to pay for it even when the economy is contracting.
And the third reason is demographics. U.S. society is graying. The number of Americans 65 or older is projected to rise from 62 million in 2024 to 84 million within three decades, and the number of centenarians — those 100 or older — is expected to quadruple over that time frame. It’s no secret that people generally require more healthcare as they age.
So, what’s a good way for an investor to take advantage of these trends and participate in that industry’s relentless expansion? There are many ways, including investing in drug manufacturers, medical device makers, health insurers, and care providers, among other health-related companies.
One health company has operations that span many of those sectors. In fact, you might have visited one of its locations in the past month. It has around 9,600 stores across all 50 states plus the District of Columbia and Puerto Rico, and 85% of Americans live within 10 miles of one.
I’m talking about CVS Health (NYSE: CVS). CVS is much more than a pharmacy chain. It provides healthcare services like lab tests, health screenings, vaccinations, and treatments for minor injuries at its in-store clinics. It employs more than 40,000 physicians, pharmacists, nurses, and nurse practitioners to enable those services.
It also owns health insurer Aetna, which it acquired in 2018. Covering 36 million people, it’s the fifth-largest health insurer in the nation.
Oh, and the pharmacy part: CVS Health has a 27% share of pharmacy prescriptions nationwide.
Right now, CVS is firing on all cylinders. The company released its second-quarter results on July 31, and both earnings and revenue beat Wall Street’s estimates. The company also increased its guidance for full-year earnings per share from a range of $6.00 to $6.20 to a range of $6.30 to $6.40. The report sent the stock sharply higher, and it climbed 18% in August.
