The Pulse of Healthcare

Healthcare has been getting healthier lately. Since the last time I wrote about healthcare the market capitalization has gone up from $12 billion to 16.6 billion which is still less than 1% of the TSX composite index. Some Canadian companies you may recognize that are included in the healthcare index are Biovail Corporation (BVF), Cardiome Pharma Corp (COM), CML Healthcare Income Fund (CLC.UN) and MDS Inc. (MDS).

The price of the healthcare index closed at $30.66 on Friday February 13, 2009. The high this last year was $41.83 in May 2008 and the low over this last year was $25.45 reached during Christmas 2008. From the bottom in December, healthcare has risen over 18%. It is technically bullish at this point with the lows and highs rising. The current price surpassed the 50-day moving average at the beginning of 2009 and is approaching the 200-day moving average.

From a fundamental perspective this sector is healthier. The average dividend yield is 5.83%, which is extremely attractive with bond yields being so low. With Obama planning to spend money on healthcare infrastructure, aging baby boomers and new developments in the medical field, I can’t help but think that healthcare is going to grow as an industry in Canada. There are a couple of challenges in Canada. First of all, the planned healthcare infrastructure spending is in the US and the Canadian market is very narrow in terms of choice compared to the US. The majority of the positive returns in Canada are a result of the increase in Biovail Corporation. The rest of the companies in the index haven’t contributed much recently. Make sure you take the pulse of the companies you include in your portfolio.