One of the problems with pure-play biotechnology stocks is that they are 100% risk-capital securities in which the probability of success is entirely beyond your control.
But healthcare and related industry investments are very much worthwhile in an equity market portfolio for the simple reason that they can be so profitable.
One company that serves the healthcare industry, but isn’t a pure-play drug discovery enterprise, is Bio-Reference Laboratories, Inc. (BRLI). Based in Elmwood Park, New Jersey, this stock is an interesting way to play the sector.
Bio-Reference is the third-largest diagnostic laboratory in the U.S. The company’s customers are physicians, hospitals, long-term care facilities, and government institutions. It has laboratory testing facilities in nine states and provided 7.8 million laboratory test requisitions in 2013, which continue to grow at a double-digit rate.
The company’s latest quarter set a new record in total revenues. Sales grew a solid 20% to $222 million on a 16% increase in patient count and a three-percent increase in revenue per patient.
Quarterly earnings came in at $15.3 million, or $0.55 per diluted share, compared to $14.7 million, or $0.53 per diluted share, in the same quarter last year.
Company management said its earnings per share for the upcoming fiscal quarter should grow approximately 15% above the most recent quarter.
Over the last 10 years, Bio-Reference has really found its stride as an enterprise and the stock is finally breaking out of a two-year price consolidation.
The company is now involved in genetic testing and believes that this will be a growth business going forward.
The stock jumped after the company’s recent earnings results and is likely to experience more capital gains near-term.
Healthcare-related equity investments have proven to provide good returns over time. In the specific case of biotechnology stocks, investment risk is extremely high.
The NASDAQ Biotechnology Index was taking a well-deserved break since this past March, but is breaking out once again and pushing new all-time highs.
Speculative fervor for risk-capital stocks diminished earlier in the year, but it’s slowly returning to both biotechnology and the broader healthcare sector.
Picking stocks in this area offers a gamut of opportunity and investment risk.
DENTSPLY International Inc. (XRAY) is a company we looked at late last year in these pages. (See “Why These Stocks Are Long-Term Portfolio Must-Haves.”)
This company is what I view as recession-resistant. It’s not the fastest-growing medical supplier, but it’s still a good business and has proven to be a consistent wealth creator over the long-term.
Generally speaking, right now isn’t a great time to be a new buyer of equities. But it is a good time to be re-evaluating your investments. Long-term holdings should have exposure to the healthcare sector for its stability, growth, and income potential.
There are 16 stock market subsectors within the massive healthcare industry. The most valuable in terms of stock market capitalization are the major drug manufacturers, followed by biotechnology companies, generic drug manufacturers, and then medical appliances and equipment.