Digital health was a $2 billion industry in 2013 and is expected to quadruple by 2018. Does that mean it's time to invest in digital health stocks?
They say an apple a day keeps the doctor away, but with the Healthbook app, Apple (AAPL) plans to bring the doctor straight to your hand. This week, 9to5Mac published images and details about the long-rumored software, which will be Apple’s first foray into health and fitness tracking. Healthbook reportedly monitors a wide array of vital stats, from nutrition, physical activity, and weight metrics to less commonplace data points like blood pressure, blood sugar, hydration, and oxygen saturation.
Health and fitness trackers have flourished with the growing prevalence of smartphones and tablets. A search for “health and fitness apps” on Google Trends reveals that queries including the term have been on an upward trend since January 2011.
Data Source: Google Trends (www.google.com/trends)
Apple even included a “Fitness Revolution” section in the App Trends portion of its “Best of 2013” roundup. Free apps ARGUS – Motion and Fitness Tracker, Calorie Counter & Diet Tracker, and Nike+ Move (NKE) were featured on the list alongside paid selections 7-Minute Workout (High Intensity Training), Moves, and Touchfit: George St-Pierre.
Digital Health Craze
Apps are just one facet of digital health, which also includes advancements in wearable technology, such as Nike’s FuelBand, home sensors, and electronic medical records. The growing industry has caught the eye of many investors who are eager to gain a foothold in a market that Bloomberg writes is expected to reach $8 billion by 2018.
Last year, according to healthcare incubator Rock Health’s end-of-the-year report, venture capitalists invested $1.97 billion in digital health startups. In August, MyFitnessPal LLC received $18 million in funding from VC firms Accel Partners and Kleiner Perkins Caufield & Byers. MedCity News reports that Sharecare, a health and wellness platform from Dr. Mehmet Oz, received $68.2 million over the course of 2013, including an undisclosed amount from the Heritage Group.
Big tech is also getting in on the digital health action. Back in 2012, Qualcomm (QCOM) created the Qualcomm Life Fund to provide financial backing to wireless health companies and startups. In 2012 the fund invested an undisclosed amount of money to AirStrip Technologies, a provider of mobile healthcare monitoring services to doctors.
The chipmaker is also sponsoring the Tricorder XPrize competition, which aims to foster the creation of a portable, handheld device that consumers can use to self-diagnose medical conditions.
Out in Kansas City, Sprint (S) is in the second week of its first-ever Mobile Health Accelerator. The three-month intensive, developed in partnership with Techstars, mentors 10 American and Australian startups working in the mobile health field. Entrepreneurs and experts in tech and healthcare provide guidance to the companies, and each startup will receive up to $120,000 in funding as a participant in the program.
Digital health is already a multi-billion dollar industry that’s poised to get even bigger. So we decided to look for investment opportunities amongst digital health stocks. We began by constructing a universe composed of stocks involved with app development, hardware production, and investing.
Next, we looked for stocks that are rallying above their 20-day, 50-day, and 200-day moving averages (MA), which indicates that these stocks have strong upward momentum. We then screened for stocks that have outperformed over the last quarter, with at least a 10% return, to isolate stocks that have been doing well.
We were left with three companies on our list.
Click on the interactive chart to view data over time.
Do you think involvement in digital health will help these companies continue to outperform the market? Use this list as a starting point for your own analysis.
1. Flextronics International Ltd. (FLEX, Earnings, Analysts, Financials): Provides design and electronics manufacturing services to original equipment manufacturers of a range of products in the infrastructure; mobile communication devices, computing, consumer digital devices, industrial, semiconductor capital equipment, clean technology, aerospace and defense, white goods, automotive and marine, and medical devices markets.
Market cap at $5.69B, most recent closing price at $9.37.
Performance over the last quarter at 27.14%.
The stock is currently rallying 2.79% above its 20-day MA, 10.57% above its 50-day MA, and 12.94% above its 200 day MA.
Apple supplier Flextronics launched its Lab IX accelerator program last year to help startups with functional prototypes produce their hardware on a mass scale. Lab IX is currently working with two digital health companies: Amiigo and Omsignal. Amiigo manufactures wristbands and shoeclips that monitor exercise and vital stats, while Omsignal creates biometric-tracking apparel.
2. Garmin Ltd. (GRMN, Earnings, Analysts, Financials): Operates as a holding company and through its subsidiaries, designs, develops, manufactures, and markets global positioning system (GPS) enabled products and other navigation, communication, and information products worldwide.
Market cap at $10.63B, most recent closing price at $54.46.
Performance over the last quarter at 18.08%.
The stock is currently rallying 2.93% above its 20-day MA, 12.47% above its 50-day MA, and 25.72% above its 200 day MA.
Garmin’s newest product is the Vivofit Activity Tracker. The fitness band includes a heart rate monitor and tracks food intake, calories, exercise, sleep, and more. Users can log their physical activity on the newly redesigned, online Connect platform, or they can use the Connect app (available for Android and iOS).
Performance over the last quarter at 12.94%.
The stock is currently rallying 6.01% above its 20-day MA, 9.68% above its 50-day MA, and 14.21% above its 200 day MA.
UnitedHealthcare has strategic partnerships with three startups specializing in mobile health: CareSpeak Communications, Fitbit, and Lose It! The partnerships were first announced in January 2012. CareSpeak's mobile Health manager platform helps patients manage their health with their phones. Fitbit makes wearable devices that measure activity, sleep, and other stats. The company also offers a free app — available for both Android and iOS — for Fitbit wearers to track their metrics and meet their goals. Fitbit is also currently facing a class action lawsuit over irritation caused by its FitBit Force device. Lose It! is a free weight loss app for Android and iOS users that offers a premium version for $39.99 a year.
(List compiled by Mary-Lynn Cesar. Return data sourced from Zack's Investment Research. All other data sourced from Finviz.)
Analyze These Ideas: Getting Started
- Read descriptions for all companies mentioned
- Access a performance overview for all stocks in the list
- Compare analyst ratings for the companies mentioned
- Compare analyst ratings to annual returns for stocks mentioned
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Dig Deeper: Access Company Snapshots, Charts, Filings
- Flextronics International Ltd. (FLEX, Chart, Download SEC Filings)
- Garmin Ltd. (GRMN, Chart, Download SEC Filings)
- Unitedhealth Group, Inc. (UNH, Chart, Download SEC Filings)
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