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A 'Boring' Business Resisting the 'Amazon Effect'

The healthcare market is under attack.

Amazon (AMZN) is invading the healthcare sector, wielding its far-reaching online presence and countless distribution warehouses to dominate the market.

Leveraging its ability to offer quick shipping to practically all locations, Amazon has transformed into a grab-anything-and-everything-possible business.

Now, it has set its sights on the healthcare and prescription sector. In fact, it has been attempting to infiltrate this segment since 2018 when it acquired PillPack.

The only limitation of that deal was that customers still had to get prescriptions from their doctors to avail of the PillPack service.

However, Amazon’s not the only one seeing the potential of this sector.

Following the difficulties it encountered in cornering the market, the e-commerce giant collaborated with fellow Wall Street titans Berkshire Hathaway (BRK.A) (BRK.B) and JPMorgan (JPM). Together, the three companies launched a service they called “Haven.”

Unfortunately, the venture eventually fell apart, and they canceled the deal altogether.

Despite that unfortunate end, Amazon refuses to back down on its vision. Recently, it decided to take another stab at the venture with a rebranding, giving birth to AmazonCare.

The goal is to offer assistance to customers in booking doctor appointments and receiving prescriptions online.

Undeniably, any business endeavor with Amazon’s backing will make waves in any industry. Nonetheless, this new venture could still be a tough sell.

For now, the company's strength is hoping to use the “Amazon effect” to sway members into signing up and using AmazonCare as well.

Surprisingly, Amazon finds itself facing an unlikely challenger in this pursuit: CVS (CVS).

Like Amazon, Berkshire, and JPMorgan, CVS has also recognized the potential of this market.

Unlike Amazon’s partners, CVS has decided to invest to become a frontrunner in terms of dominating the same sector and eventually taking advantage of this rapidly expanding total addressable market.

Instead of following the track of its fellow healthcare providers, such as UnitedHealth (UNH) and Anthem (ANTM), CVS has opted to change its angle of attack in the hopes of gaining more market share and reaping higher profits.

CVS is putting to good use its over 9,900 stores and distributions as means to establish better connections and rapport with customers.

After all, statistics indicate that approximately 80% of American citizens live less than 10 miles from a CVS branch.

This offers CVS a competitive advantage in terms of proximity to its customers. That is, it offers a unique convenience as it serves as the ever-present “corner stores” in practically every city.

Leveraging the locations, CVS has set up about 1,500 branches into “HealthHubs” by the end of 2021.

Basically, HealthHubs serve as emergency care clinics found inside CVS stores, providing customers with easy access to convenient and even cheaper after-hours health checkups.

Aside from this feature, a growing number of CVS stores are starting to get set up to be able to ship medicines or any other products ordered online, while other branches are being eyed as potential UPS drop-off points.

This setup will transform several branches into convenient “mini” distribution centers.

CVS has broken out of its “boring corner drugstore” image following its decision to target a more lucrative and massive healthcare sector.

It started the ball rolling when it acquired Aetna for $69 billion—a decision that so many investors disapproved of at that time.

Until recently, the market has largely ignored CVS because of the debt it incurred from the Aetna deal.

However, the tides had turned when investors finally realized that the drugstore giant had been efficiently and effectively executing a brilliant strategy all this time.

With Aetna under its wing, CVS has been granted access to a multitude of healthcare and managed care benefits availed by more than 23 million members. The sheer number of subscribers transformed the company into the third-biggest health insurer in the United States—next only to decades-long established providers Anthem and UnitedHealth.

Riding this momentum, CVS has been aggressive in revamping its image and expanding its services.

On top of its HealthHubs and Aetna advantages, CVS has recently paired up with Teladoc (TDOC) to leverage its virtual healthcare services to offer even more convenience to its customers.

This is another massive market since CVS already has roughly 35 million digital customers subscribed to its CVS app.

These users are all ordering products and other prescriptions from CVS. Integrating Teladoc’s services to the mix would be a surefire way of boosting its membership and adding a lucrative revenue stream.

Keep in mind that the global market for telehealth services is projected to expand somewhere between $300 billion to $700 billion by 2028—and that’s a conservative estimate.

CVS’ move to use Teladoc software is a positive indication of early technology adoption, positioning the drugstore chain at the forefront of a healthcare revolution.

Overall, CVS can only be described as a company striving to become a unique business that offers a range of products that no one else in the industry provides.

Although it’s improbable that it’ll sustain a monopoly in these services, CVS has been gradually transforming and growing into an almost unbeatable force in the industry by leveraging its strengths in an effective and logical method.

Moreover, it has evolved from a stodgy drugstore into an early tech adopter and a revolutionary business that can stand to challenge the likes of Amazon.

January 18, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
January 18, 2022
Fiat Lux

Featured Trade:

(THE PERFECT COUNTERBALANCE FOR A VOLATILE TECH)
(CI), (ANTM), (CVS)

The Perfect Counterbalance for a Volatile Tech

Biotech Letter

Investing in quality stocks is a surefire way to slowly build a healthy portfolio over the years.

As long as you buy and hold stocks that have the potential to expand and offer stable financials continuously, then you’ll be securing your long-term success.

Obviously, this strategy is less risky compared to jumping on every new bandwagon and believing hyped ideas.

Then, there are breakthrough ideas that look too good to pass up. A good example is the cryptocurrencies such as Bitcoin and Ethereum.

Both operate on blockchain technology, which holds the potential to revolutionize practically all industries by decentralizing them and utilizing data in more efficient ways.

While investing in this kind of technology can definitely be exciting and thrilling, it’s undeniably scary for some who are still unfamiliar with it.

But, what if there’s a safer and more traditional way to get your foot in this groundbreaking technology?

Here’s where Cigna (CI) comes in.

Cigna is one of the handful of companies that are looking into integrating blockchain into their business, such as accepting cryptocurrencies as an additional form of payment.

Needless to say, investing in Cigna would offer you exposure to this new and emerging blockchain technology sans the risk that comes with every new technology.

This is a unique move considering that health insurance stocks are not exactly widely known as proponents of cutting-edge technology.

Aside from Cigna, other providers have been looking into leveraging blockchain to improve their operations. Some names associated with this project include Anthem (ANTM), CVS (CVS), and Cleveland Clinic.

Although blockchain remains in the early innings in terms of its existence in the healthcare industry, investors seeking some exposure would benefit from this reasonably safe option.

After all, Cigna is nothing but a safe stock.

Everyone has practically heard of the company.

Cigna provides Medicare and Medicaid products and insurance coverages not only within the United States but also in some international markets.

Known as a “global health service company,” it has approximately $64.5 billion in marketing capitalization and is considered the fifth-biggest healthcare organization in terms of revenue.

In 2021, it reported over $160 billion in revenue and has managed to rake in profits consistently.

With a net margin of roughly less than 6% of its sales, Cigna has been an investor darling by being consecutively in the black in the last 5 years.

For its 2022 plans, Cigna aims to grow its addressable market to add 3 new states and 93 new countries to reach 1.5 million new customers eventually.

The company also recently secured a new 7-year deal with the US Department of Defense, which would hand over the handling of the healthcare services of roughly 9.6 million active-duty service members to Cigna.

Moreover, Cigna has been working on targeting high-margin sectors like specialty pharmacies.

One of these businesses is Accredo, which manages individuals suffering from complex and hard-to-treat chronic ailments. These conditions include HIV, hepatitis C, and even cancer.

These types of illnesses demand a lifetime’s worth of medications with astronomical price tags. Clearly, being able to get a foothold in this segment would open up a lucrative revenue stream for Cigna.

Basically, Cigna is not your typical flashy stock that gains much attention from the market or the news. Nonetheless, it’s a solid pick that never fails to get the job done.

If anything, investing in Cigna would mean buying and forgetting about it while you collect a stable dividend yield of roughly 2% from this healthcare provider—a solid yield that’s better compared to the 1.3% average of the S&P 500.

So, for cryptocurrency fans, buying Cigna shares would simply be a way to diversify into a sector where you won’t really anticipate that much bullishness on blockchain.

cigna

December 16, 2021

Diary, Newsletter, Summary

Global Market Comments
December 15, 2021
Fiat Lux

Featured Trade:

(TESTIMONIAL)
(LONG TERM ECONOMIC EFFECTS OF THE CORONAVIRUS),
(ZM), (LOGM), (AMZN), (PYPL), (SQ), CNK), (AMC),
(IMAX), (CCL), (RCL), (NCLH), (CVS), (RAD), (WMT)

July 20, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
July 20, 2021
Fiat Lux

FEATURED TRADE:

(A SNAPSHOT ON HOW TO LIVE A BETTER LIFE)
(DXCM), (CVS), (WBA), (RAD), (MDT), (ABBT), (SENS),
(TDOC), (AMWL), (AMZN), (AAPL), (GOOGL), (GRMN)

A Snapshot of How to Live a Better Life

Biotech Letter

The routine medical check-ups we have today are primarily based on physical exams that were developed way back in the 1820s, utilizing tools that haven’t been upgraded for over a century.

More alarmingly, all we go through is a “comprehensive” health check once every year, offering us just a snapshot of what’s truly going on in our bodies.

If anything, we monitor the releases of new software for our phones and laptops more than we pay attention to our own bodies.

As we’ve proven with the COVID-19 pandemic, so much can happen in a year

Truth be told, our bodies can deteriorate at lightning speed and without any warning. That’s why it’s terrifying to think that we’re not doing as much to monitor our health.

So, what can we do to change this? How can we be more proactive when it comes to our health?

The COVID-19 pandemic has brought many changes into our lives, and this is one of the biggest transformations it has done: an exponential spike in demand for telehealth services.

One of the major issues between patients and doctors at the height of the pandemic was how to go through the physical exams without actual physical contact.

Clearly, it’s not possible to hear a heart murmur or irregular breathing over a video call.

This is where a lot of innovative companies come in.

For a more specialized exam, HD Medical released a credit card-sized device called HealthyU.

Patients simply touch it with their finger, and the device can instantaneously measure their heart rate and sounds, temperature, and even oxygen saturation.

All these data would then be sent to their doctors or health providers in real-time.

HealthyU also has a remote EKG, which effectively allows it to serve as a portable roadmap to a patient’s heart health and helps doctors monitor for signs of heart attacks and arrhythmias.

For example, there’s this handheld exam kit called Tyto that patients can use to perform their own guided medical exams.

This palm-sized gadget is linked to an app, so your doctor can monitor you remotely.

Patients suffering from a sore throat can use Tyto’s camera to let the doctors see the back of their throats, while those struggling from chest pains can easily use the stethoscope to help their physicians listen to their lungs and hearts.

And these are just for physical exams. There are more advancements in health monitoring, and this is where wearable technology comes in.

Wearable technology is considered one of the most promising growth drivers, largely due to the health sector.

The market size for this segment is estimated to rise from $116.2 billion in 2021 to $265.4 billion by 2026, showing off an 18% CAGR growth within a 5-year period.

Applications for wearables have expanded to areas including medical surgery as well as internables and implantables or sensors, which can be fitted into our bodies to help doctors observe various health parameters.

It’s no wonder brands like Apple (AAPL) with Apple Watch, Google (GOOGL) with Fitbit, and Garmin (GRMN) have been working overtime to try to cover as much of the wearable health market as possible.

So far, these products provide extensive data ranging from calories burned to our heart rates.

Aside from them, there are other wearables in the market today that could change the landscape of the health industry.

One of them is the Oura Ring, which was first introduced in 2013.

Designed to be worn 24 hours a day, this device measures the bodily functions of the user. It gathers data through infrared light sensors that touch the finger arteries.

One of the most impressive things it can do is monitor your sleep movements to help determine early onset of some neurodegenerative diseases like Parkinson’s.

The information is all sent to the app, which users can access via their smartphones. The Oura Ring is somewhere between $299 and $999, depending on your preferences in style and color.

Although it’s yet to be a mainstream product, the Oura Ring was provided to NBA players when they resumed their season amid the COVID-19 pandemic.

The device was used to help the basketball stars monitor their health.

In fact, a joint study with the University of California San Francisco showed that the Oura Ring was able to help detect the common symptoms of COVID-19 three days earlier and with as high as 90% accuracy.

Another impressive health monitoring advancement covers the glucose monitoring product line of Dexcom (DXCM).

The primary goal of Dexcom is to take away the guesswork that comes with finger pricking.

By offering a wearable sensor, people with diabetes can easily and accurately monitor their glucose levels.

What’s even more convenient is that Dexcom’s wearable is available in practically all large pharmacies like CVS (CVS), Walgreens (WBA), and Rite Aid (RAD).

To date, Dexcom’s biggest competitors include Medtronic’s (MDT) Guardian Connect, Abbott’s (ABBT) Freestyle Libre, and Senseonics’ (SENS) Eversense.

These are only some of the emerging technologies that could help us improve the quality of our lives today, with thousands more expected to follow suit in the years to come.

For an endlessly advancing world with smartphones, supercomputers, smart homes, and even self-driving cars receiving software updates virtually every week, it’s absurd to think that we only allot a single check-in on our health annually.

But with the advent of these technologies and the increasing popularity of telehealth services spearheaded by the likes of Teladoc (TDOC), Amwell (AMWL), and even Amazon (AMZN), it looks like we’re starting to finally pay more attention to our health.

health

June 22, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
June 22, 2021
Fiat Lux

FEATURED TRADE:

(PRIMED FOR DOMINANCE)
(TDOC), (AMZN), (AMWL), (WMT), (CVS), (ARKK), (TSLA)

Primed for Dominance

Biotech Letter

While growth stocks have already begun clawing their way back following the losses they suffered earlier this year, there are still former market favorites struggling to bounce back.

One of them is Teladoc Health (TDOC).

To date, Teladoc is still trading at roughly 40% below its previous highs.

While this can be frustrating for its investors, the current situation might just be an opportune time to add this stock to your portfolio.

Teladoc emerged as the leader in virtual care in 2020 by being at the right place at the right time when the pandemic struck. That year, the company’s revenue rose by a whopping 145% compared to its 2019 performance.

These days though, the stock has lost half of its value. Although that’s definitely a head-scratcher, Teladoc’s 51.5 million paid memberships in the United States alone still make it the most dominant force in this industry.

For a long-term investor, the situation presents a compelling opportunity.

Teladoc is a growing business that’s expanding both in the US and globally. While penetrating more markets would happen over time, the basic footprint has been established. This offers Teladoc much-needed exposure to a massive addressable market.

The global market for telemedicine is estimated to expand from $49.9 billion in 2019 to a jaw-dropping $459.8 billion by 2030.

In North America, which holds roughly 34.4% of the market share in 2020, the telemedicine market generated $19.23 billion during the pandemic.

Taking into consideration Teladoc’s revenue of $967.4 million for its US segments in 2020, it becomes clear that the company is only getting started, as this comprised only 5% of the market size.

If the company maintains its momentum, then the next 10 years would be an incredible journey for Teladoc investors.

Despite the disappointing share price performance of Teladoc in the past months, the company’s actual business has sustained its growth.

Revenue continues to rapidly rise, showing off a 151% growth in the first quarter of 2021.

This impressive growth has prompted Teladoc to boost its full-year revenue guidance to $2 billion, which indicates an 80% year-over-year gain.

Impressive growth has been observed all around, with access fee revenue going up 183% while visit fees climbed 24%.

Considering the size of the market, it no longer comes as a surprise that Teladoc is facing competitive threats.

Amazon (AMZN) and Amwell (AMWL) have recently entered the virtual care market. Even Walmart (WMT) and CVS (CVS) have been working on toppling Teladoc as well.

Despite the competition, Teladoc remains ahead of the pact thanks to its continuous efforts to innovate.

For example, the latest innovation from Teladoc is Primary360.

This product is designed to take virtual healthcare to the next level. It offers personalized service at the patient level. Here’s a preview of how it works.

Traditionally, patients go to their doctors when they discover a health problem. This is a reactive way of dealing with health. In contrast, Primary360 is proactive.

That is, the product monitors the patients individually from annual checkups to ongoing treatments to manage chronic conditions. Through closely monitoring the patients, Teladoc is able to perform earlier diagnoses of potential diseases and help doctors reach better outcomes for treatments.

To better picture the long-term rewards of this company, it’s good to keep in mind that Teladoc is actually the second biggest holding of Cathie Wood’s ARK Innovation ETF (ARKK), next only to Tesla (TSLA).

Teladoc Health emerged as one of the most popular pandemic plays in 2020.

While the stock tumbled when vaccines hit the market, its projected growth trajectory remains promising. In fact, Teladoc’s revenue growth is anticipated to skyrocket over the remainder of this decade, with telemedicine estimated to reach roughly half a trillion dollars by 2030.

For investors on the lookout for long-term plays, Teladoc Health's tumble has presented a good opportunity to add it to your portfolio.