Market Overview

3 Stocks to Profit from the Rise in Hospital Spending

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A recent study from The Journal of the American Medical Association predicted healthcare spending in the United States will increase to about $3.3 trillion by 2015. Around $1 trillion of that will be for rising hospital expenses.

Shareholders of Health Management Associates (NYSE: HMA), HCA Holdings (NYSE: HCA) and Select Medical Holdings (NYSE: SEM) should profit from that trend.

Those owning these three stocks have already enjoyed healthy returns.

For 2013, Health Management Association is up more than 40 percent. Since the first of the year, HCA Holdings has soared more than 55 percent, and over the last six months, Select Medical Holdings has risen more than 11 percent.

There are two major forces that have Wall Street so bullish on these stocks.

The first is the history of healthcare spending in the United States: it increases! That is a tremendous strength of the American medical system and economy, not the weakness many paint it to be. The American healthcare system is not just the best in the world, but the finest in history. That is why so many from abroad come to the U.S. for medical treatment.

Spending increases yearly, as there is so much more and so much better healthcare goods and services available for consumers. The United States spends the most on health care of any country in the world: would you want to live in the one that spends the least?

A recent development that will increase business for hospitals is the Affordable Care Act, or ObamaCare.

The Affordable Care Act extends insurance coverage to millions of more Americans. That is bullish for hospitals for a variety of factors. The more people who have health insurance coverage, the more of them will use hospitals. More of those using hospitals will have the bills paid by insurance companies, which increases revenues for hospitals. There will be less defaults from those who do not have the money to pay for the average daily rate of $4000.00 in an American hospital.

For investors, the defensive natures of hospital stocks should also be appealing.

There will always be trillions spent on healthcare in the United States, much of that from the government. Hospital stocks will always have a steady stream of revenues. Select Medical Holdings shares that with its shareholders in the form of a very health dividend yield of 4.66 percent.

Posted-In: Affordable Care Act AMA healthcareLong Ideas Dividends Small Cap Analysis Economics Trading Ideas

 

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