Why consider investing in health care?
Starting at the end of the first quarter of 2020, the health care sector captured tailwinds from the global pandemic, which sparked novel medical and technological advancements as governments and drugmakers scrambled to contain the health crisis.
Historically, the health care sector has been less volatile than technology. It’s also poised for long-term growth, underpinned by a global aging population, increased health awareness and greater health care spending in emerging markets such as China and India.
Pharmaceutical companies are developing a wide range of treatments, including targeted therapies for different types of cancer. Healthy annual revenue helps these companies invest in research and development, maintain a busy pipeline of new treatments and make strategic acquisitions.
Their offerings are further boosted by steady advances in health care technology. Digital health technologies, such as electronic health records, telehealth platforms and mobile health apps, have the potential to attract greater investor interest. The digital health market is already projected to grow by $563.59 billion globally from 2023 to 2027, at a rate of 25.8% annually.
Canadian investors may also find it reassuring that health care is one of the few sectors that weather global political and economic uncertainty well. Health care is something everyone needs, irrespective of what’s happening around the world. Therefore, these companies enjoy a certain degree of immunity from economic uncertainty, generating consistent revenue in good times and bad.
Predictable cash flow and revenue make health care firms an appealing choice for investors seeking safety in these uncertain times.
Where to invest in health care?
Investors can choose from a diverse range of businesses in the health care sector, including medical equipment, drug manufacturing, biotechnology, health care providers, life-science tools and services, and medical insurance. Each of these businesses is exposed to the exponential strides that medical science is making in treating diseases such as cancer, multiple sclerosis, diabetes, autoimmune disorders and cardiovascular diseases, among others.
The global health care market is valued in the trillions. In the United States alone, national health expenditures topped USD$4.25 trillion in 2021, according to Peterson-KFF’s Health System Tracker.