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You Don’t Need To Run From This Market… Just Head Towards Healthcare, The Flame-Resistant Sector
The Smart Profits Report
Thursday, September 30, 2008: Issue #563
by Marc Lichtenfeld, Senior Analyst & Healthcare Specialist, Smart Profits Report
Rest assured… my Smart Profits Report colleagues and I are fully aware that this is one scary investment climate right now.
With more than 100 years of combined stock market experience, we’ve lived through many upturns and downturns. But what we’ve seen recently is undoubtedly the worst crisis in a generation.
Many investors have cashed in their chips and headed for the nearest cave to ride out the storm, unable to handle such a stock market rollercoaster. While we certainly don’t blame them, we’re here to show you that there are ways to protect yourself - and even profit - during this very challenging period.
And today, that duty falls to me. So here goes, with my views on a sector that could ride out this crisis better than most…
Wall Street Loves Nothing
In my column here last week, I wrote about why I believe healthcare stocks will not get hurt too badly during the current financial upheaval. If you missed it, you can read it again by clicking this link.
Today, I want to follow up on that by talking about another reason why healthcare should hold up well over the intermediate-term.
You remember how the television show “Seinfeld” was famously a “show about nothing?” Well, just as viewers loved that rather quirky concept, Wall Street is also a bit like the show: It prefers situations where nothing happens.
When opposing parties control the White House and Congress, for example, the stock market typically thrives on the gridlock that is often created. When the government is not willing, or able, to make significant changes to the status quo, stocks tend to respond.
And the reason is simple: It’s the fear of the unknown that sends stocks lower. So when the market hears that a new administration is determined to change the way America does business, it usually doesn’t sit very well.
So what does that mean for us?
Lost In The Financial Shuffle
Right now, the federal government is obviously in the process of making a monumental change to American business.
The massive bailout package, nationalizing of financial institutions, and banning short sales will all have a tremendous effect going forward on both business and the stock market. And I suspect that when the dust settles, the market will not be happy with the new rules and environment.
Unfortunately, some projects and goals will get lost amid the current commotion to clean up Wall Street’s financial mess - and one of those efforts will be to reform the healthcare system.
Sure, you’ll hear Senators Obama and McCain mention the topic in their debates and stump speeches. However, with major bank failures, job losses and economic calamity wreaking havoc, healthcare reform has fallen on the priority list.
If the financial sector and stock market were ticking along as normal, we’re sure that several other issues would be receiving much more attention than they are now, instead of being lost in the shuffle.
And with healthcare, that means we might have seen one or both candidates promising to make significant changes to the U.S. healthcare system. On the surface, that sounds likes good news, right?
Not to those investing in the sector. That would have made healthcare investors jittery about what these plans would entail - and what it would mean for the industry and their money. As Garth Algar so eloquently put it in that fine film, “Wayne’s World”, “We fear change.”
Hey, This Sector Needs Fixing, Too
However, while the market might fear change, healthcare reform is a populist platform that resonates with most Americans. I’m certain that every one of us has experienced healthcare frustration at one time or another - be it with insurance companies, doctors, or hospitals.
It’s widely known that the U.S. is a long way from a perfect system. When cancer patients need to hold off getting their chemotherapy until their insurance company approves treatment, or a sick person doesn’t go to the doctor because they can’t afford it, something is broken and needs to be fixed.
However, major healthcare reform is difficult under the best of circumstances (just ask the Clintons). But in the current environment, the focus has shifted elsewhere. We’re in crisis mode over the financial system. Yet even if the bailout package is signed and sealed, all that wrangling and money still doesn’t guarantee an instant resolution. The fact is, our leaders will be dealing with this issue for some time, as will the candidates.
Once the economy stabilizes and we return to some sense of normality, healthcare reform should pop up on the radar again. Until then, don’t expect any drastic changes to the way healthcare is provided and paid for.
And that’s just the way Wall Street likes it.
Marc Lichtenfeld
Editor’s Note: You don’t just have to sit around, idly waiting for Wall Street to clean up its mess before you can invest safely again. Obviously, you’ve got a far better chance of making money in some sectors than others at the moment - and healthcare is one of them. Marc puts his money where his mouth is by making recommendations in both his specific healthcare investing service, Access, as well as the Xcelerated Profits Report newsletter. Marc has enjoyed impressive success with XPR picks like BioMarin (Nasdaq: BMRN) and Medivation (Nasdaq: MDVN) and combined, his XPR recommendations are up 14%, versus a 25% loss for the S&P 500 and 14% loss for the S&P Healthcare Index. Find out how you can profit from Marc’s picks, plus the rest of the team’s recommendations here.
Related Articles at: www.smartprofitsreport.com:
Healthcare Investments: 5 Steps to Investing in Healthcare During a Bad Economy
The Healthcare Sector: Recession-Proof Your Portfolio With This Robust Sector
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