Pharmacies, labs, billing agencies and insurers all say business
is down from the same period a year ago. Recent
reports show Americans are seeking less medical care.
The reason is twofold. The most obvious is that unemployment
remains high, at 9.6% of the workforce. Jobless workers don't have
employer-sponsored health plans, and after a while (15 months),
COBRA benefits -- group health plans that allow previous workers to
pay for their own coverage out of pocket -- expire.
The second reason is that more Americans are opting for
high-deductible plans. These policies cover eligible medical
services only after the patient pays for a certain amount of care.
McKinsey, a consulting firm, says 18 million Americans bought such
plans this year versus 15 million last year, a meaningful rise of
is also contributing. It turns out that how Americans feel about
their personal financial situation is every bit as important as how
they feel physically, and many are postponing or simply doing
without nonessential elective procedures. Consumer confidence, as
tracked by The Conference Board, fell in June and took another dip
in July. The University of Michigan Consumer Sentiment
also fell in July -- to the lowest level since November.
Health care, as we have all heard, has grown faster than the
overall economy for years. A protracted recession with iffy
consumer spending could slow that trend. Consumers may well opt to
forgo cosmetic surgery or a knee replacement, preferring to keep
the money in the bank in uncertain times.
That might spell trouble for health-care investors.
And yet one company looks to be immune from the trend. This company
not only provides a medical service that cannot be postponed, it's
also -- in almost all cases -- paid for by the government. It is
the only medical condition for which both things are true.
We might grouse about health-care policy in this country, but not
only do Americans benefit from the best care in the world but the
United States government, in its benevolence, makes sure that
patients who need a certain kind of medical treatment always get
it, regardless of whether they are covered by insurance or not. If
doctors diagnose this condition in a patient, then -- regardless of
age -- that patient will be enrolled in Medicare, with Uncle Sam
picking up the tab.
That condition is renal failure. If you have kidney disease -- and
a growing number of Americans do -- then Medicare will cover you.
As I said, this is the only medical condition for which that is
true. Happily, dialysis can keep patients alive for decades until
they die from other medical causes or, as is to be hoped, they are
able to find a donor kidney and undergo a transplant -- which carry
very high success rates.
is a leading provider of dialysis services -- not only the
treatment itself, which removes certain elements from the blood,
but also of the drugs needed in the procedure, which some patients
may need twice a week. The $6.4 billion company has more than 1,500
treatment centers in 43 states. It generates a reliable $1.5
billion in revenue each quarter and manages a net
of about 8%, relatively high for the health-care sector, where a
well-run hospital typically clears between 2% and 3%.
With a life-or-death essential service, a nationwide footprint and
a customer -- Uncle Sam -- who absolutely always pays the bill,
DaVita has a strong
in an industry with relatively high barriers to entry. That's why
this pick, which I shared with the subscribers of my premium
newsletter, has outpaced the market in the past year and beaten the
S&P 500 almost five to one this year.
Kidney disease is more prevalent than most Americans would guess --
about 11.5% of adults (those 20 or older) have some form of it.
More than half a million Americans, National Institute of Health
data show, are in some sort of treatment for it -- most as a result
of diabetes or hypertension, both of which are also on the rise.
Action to Take -->
Health-care investing can be volatile for a variety of factors: A
number of these companies saw large swings during the health-care
debate, for instance, as Wall Street wondered how policymakers
would change the system. Through this, though, DaVita shares
remained not only strongly resilient but in fact outperformed the
Regardless of the degree to which Americans make or begin to make
discretionary medical decisions, this is one company I think will
continue to help hundreds of thousands of patients live normal,
active lives and also generate meaningfully significant returns for
Andy Obermueller is the Chief Investment Strategist for
Government-Driven Investing and Fast-Track Millionaire. Andy is a
research fanatic who spends dozens of hours each week poring over
government data and corporate finances. His research skills were
honed over the ten years as a financial journalist, working for
some of the nation's largest newspapers. Read more...
Disclosure: Neither Andy Obermueller nor StreetAuthority, LLC
hold positions in any securities mentioned in this article.