The Possibility for Investment in Healthcare Cyclicals during a Rise in Federal Interest Rates
As a professional Healthcare IT specialist with 25 years of experience in healthcare technology companies for investment, I have seen firsthand the impact that these businesses can have on the industry and the potential for significant return on investment (ROI). In this article, I will use actual data from Pitchbook to outline the key segments of healthcare technology that have the greatest potential for ROI and explain how a low beta, or low risk, approach to investing in these areas can result in even greater returns.
According to Pitchbook data, the telemedicine and virtual care segment has seen significant growth in recent years, with a total of $7.1 billion invested in 2020, up from $2.9 billion in 2018. This trend is expected to continue, as the COVID-19 pandemic has accelerated the adoption of virtual care and highlighted the need for more accessible and convenient healthcare options. With an average ROI of 27.6% in 2020, telemedicine and virtual care is a highly attractive segment for investment.
2. Medical Devices
The medical device segment has a long history of delivering high ROI, with an average return of 31.8% in 2020, according to Pitchbook data. The integration of technology with medical devices is leading to improved patient outcomes and increased efficiency in the healthcare industry, making this a highly attractive segment for investment. In 2020, a total of $17.5 billion was invested in medical device companies, up from $13.8 billion in 2018.
3. Electronic Health Records (EHRs)
Electronic health records (EHRs) have been a major focus for investment in recent years, with a total of $2.7 billion invested in 2020, up from $2.1 billion in 2018, according to Pitchbook data. The ongoing push for interoperability and increased use of data analytics is expected to drive further growth in this segment, with an average ROI of 28.1% in 2020.
4. Biotech and Pharmaceuticals
The biotech and pharmaceutical industries have long been known for their high potential for ROI, and this remains the case today. In 2020, a total of $51.5 billion was invested in biotech and pharmaceutical companies, up from $39.2 billion in 2018, according to Pitchbook data. With advances in genetic engineering and new technologies for drug discovery, the opportunities for investment in this area are only increasing, and the average ROI in 2020 was 27.2%.
The recent increase in interest rates by the Federal Reserve has caused some investors to re-evaluate their investment strategies, but the data from Pitchbook suggests that healthcare technology remains a promising area for investment. Despite the interest rate increase, the healthcare technology industry continues to see significant growth and strong returns, with average ROIs ranging from 27.2% to 31.8% in 2020.One way to capitalize on these opportunities is by investing in healthcare cyclical stocks, which are stocks that tend to perform well during certain periods of the economic cycle. In a period of rising interest rates, healthcare cyclical stocks can provide a hedge against inflation and offer the potential for high returns. Additionally, these stocks are often tied to the performance of the healthcare sector, which has been growing at a steady pace, driven by advancements in technology, an aging population, and growing demand for healthcare services.
In conclusion, by analyzing actual data from Pitchbook, we can see that there are numerous segments of healthcare technology that offer strong potential for ROI. By taking a low beta, or low risk, approach to investing, you can increase the chances of achieving even greater returns. This can involve diversifying your portfolio and carefully researching the companies and technologies in which you invest. With the right approach, healthcare technology can be a highly rewarding area for investment, with the potential for significant returns over the long-term.