Health-Care Stocks Expected to Outperform Market Amidst Shift in Industry Dynamics

Strategic Insights -

Health-care stocks are projected to exceed market performance in the future due to their superior growth prospects, according to analysts at Sutro & Co. The analysts attribute this growth to the aging population, innovative medical technologies, and emerging markets in the Pacific Rim and Eastern Europe. Sutro & Co., founded in 1858, is the oldest securities firm in the Western United States, with analysts based in West Los Angeles and New York. Their predictions are detailed in the first issue of Vital Points, a quarterly publication written by four Sutro analysts.

Key Takeaways:

  • Sutro & Co. analysts predict health-care stocks will outperform the market due to superior growth prospects.
  • The analysts cite aging population, innovative medical technologies, and emerging markets as key drivers of growth.
  • The industry is expected to shift towards a more efficient, low-cost, and technologically-driven model.
  • The Sutro analysts estimate that health care will evolve into a new industrial-style organization, with providers accepting pre-set prices and being judged on outcomes.
  • The creation of publicly owned companies is expected as a result of this shift.
  • Vital Points introduces indices for measuring the performance of health-care stocks across five sectors: biotechnology, dental, medical devices, pharmaceutical, and medical services.
  • Select biotechnology stocks are recommended for investment, despite recent clinical trial failures.
  • Dental stocks are expected to improve in prospect, despite recent underperformance.
  • The long-term outlook for selected medical device companies is excellent.
  • Pharmaceutical stocks are no longer undervalued and should be bought during market weaknesses.
  • Medical services stocks are underperforming due to Medicare cutbacks and controversy, but are expected to perform better in the future due to favorable demographic trends and potential for consolidation.

Statistics:

  • Sutro & Co. analysts expect health-care stocks to outperform the market.
  • 92 pages: the size of the first issue of Vital Points.
  • 4 analysts: Eugene Melnitchenko, D. Larry Smith, Bonnie Feldman, and Edward R. Vanacore, wrote the report.
  • 17 companies: publicly owned health-care companies profiled in Vital Points.
  • 5 sectors: biotechnology, dental, medical devices, pharmaceutical, and medical services, for which Vital Points introduces indices.

Sources:

  • Vital Points, first issue
  • Sutro & Co.
  • BW HealthWire
  • Wall Street Journal
  • 1998 All-Star Analysts team
  • Suzanne Conrad
  • Rosa Mendoza