A Healthcare-Related Stock With Potential In Risky Environment
Sept. 17, 2019
Struggling to find somewhere to invest is one of those first world problems. It can be frustrating at times, but it sure beats struggling to find money in the first place. That said though, current conditions, with stocks close to all-time highs despite a host of unresolved global risk factors, presents a challenge for those lucky enough to have cash to deploy.
In the past, investors looked to healthcare as a “recession-proof” sector, but with that being the main theme of discussion in then early election exchanges, that isn’t the case now.
There is, however, one healthcare relate stock that looks immune to most of the risks.
Stericycle ( SRCL ) is a Nasdaq-listed stock that specializes in the disposal of hazardous waste. That is not the kind of business that would be a target of a “Medicare for all” type plan being tossed around in the Democratic primary debates, nor is it particularly susceptible to fluctuations in global growth.
The relative lack of regulatory and political risk is evident in that Stericycle already operates in Europe, where state-run healthcare systems are the norm. If anything, one could argue that this is a plus for SRCL, should the Democrats win and push healthcare in that direction.
Regardless of who wins the Democratic nomination and who wins next year’s Presidential election, fully socialized medicine in the U.S. is probably not going to happen anytime soon, but that isn’t the point. For the market, just the fear of that will drive positioning as the election approaches, and a stock that avoids that risk but can still benefit from the global growth in healthcare expenditure should be a beneficiary.
That growth is fueled by a couple of things. Improvements in medicine and new, innovative treatments and drugs mean that more things are treatable and that we live longer on average. At some point, the growing amount of resources that are directed to healthcare will have to be addressed if that continues, but for now, spending is predicted to continue to increase exponentially. More tests and procedures means more waste that has to be disposed of.
The main area of business for Stericycle, therefore, is set to grow regardless of economic conditions. Medical waste is not the only area they are in, however. The company also manages other types of hazardous waste, and also has divisions that, for example, dispose of sensitive documents. That diversification is a plus in some ways, but it has caused problems for the company in the past.
It has resulted in a lack of focus and a seeming inability to control costs. That looks to be changing. Cindy J Miller was appointed CEO in May of this year and has made margin improvement and rationalization a priority. That seems to be paying off already as losses fell in her first quarter, and there is a distinct plan to rationalize operations and focus on its core business in the U.S. and Europe.
No investment is perfect and without risk, of course. The turnaround at Stericycle is just beginning and there will be bumps along the road. It is, however, a company that is heading in the right direction. Its place in an industry that can grow regardless of the risks to global growth and its relative immunity to political risk make it a stock that offers a lot of potential, regardless of overall market valuation and domestic politics.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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