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The Healthcare industry is massive — and it’s continuing to grow. According to data from the Centers for Disease Control and Prevention, currently, the U.S. spends more money on personal health care than any other developed country in the world. The CDC also projects that this trend will continue as Americans live longer, retire sooner, and have babies at older ages. According to a recent report by market research firm MarketsandMarkets, the global healthcare supplies market is expected to reach more than $200 billion by 2022. There are a lot of potential entry points into this booming sector, but investors should look for companies that can withstand an increasingly competitive landscape while also benefiting from trends in cost containment and disease management.

Healthcare Supply Stocks to Watch

• McKesson – This healthcare supply company is one of the largest distributors of pharmaceuticals and medical supplies in the country. McKesson’s business model of distributing goods at the point of use has helped its medical supply unit grow to be one of the largest in the industry.
• Cardinal Health – This company, which was formed by the merger of Cardinal Health and Medtronic, manufactures and distributes medical supplies and equipment, including diagnostic imaging supplies like X-ray films, films, and cassettes.
• AmerisourceBergen – AB deals with pharmaceuticals, medical and surgical devices, nutritional products, and other healthcare supplies. The company also distributes generic drugs and branded drugs from manufacturers like Pfizer (NYSE: PFE), Johnson & Johnson (NYSE: JNJ), and Merck (NYSE: MRK).
• American Hospital Supply – AH Supply, as the company is more commonly known, provides a wide range of products and services to hospitals, surgery centers, and other healthcare facilities. AH Supply provides a wide range of products and services, including patient care and mobility equipment, medical and infection control supplies, surgical products, and supplies for diagnostic imaging.

Know Your Supplier: AmerisourceBergen Corp.

To understand just how important supplier relationships are to the healthcare industry, consider this example: each year, the blood Supply chain must collect, screen, and process approximately 42 million units of blood. While that seems like a lot of blood, it represents just a fraction of what’s needed to meet global demand. Specifically, an estimated 25 million blood components are needed in the U.S. alone. Unfortunately, the supply chain for blood is extremely fragile, and about 21% of all the blood donated is discarded due to the inability to test for pathogens. With that in mind, the importance of having a supplier that can provide a safe and reliable supply of blood can’t be understated. Therefore, before investing in a healthcare goods stock, it’s important to make sure that the company you’re considering has a strong track record of handling blood and other healthcare products.

American Hospital Supply Inc.

For investors looking to get exposure to the Healthcare Supply Chain, American Hospital Supply Inc. (AHS) presents a compelling investment case. The company operates in the healthcare supply chain, providing a wide range of products and services, including patient care and mobility equipment, medical and infection control supplies, surgical products, and supplies for diagnostic imaging. Although AHS has been around since 1925, its business model hasn’t changed much since. In fact, the company has long been a leader in the pharmaceutical distribution space. Currently, AHS is the largest provider of blood management products in the U.S., which is a testament to the company’s longstanding focus on customer service and quality. Unfortunately, AHS tends to trade at a discounted valuation relative to its healthcare goods peers due to the cyclical nature of its business. That said, long-term investors with a strong stomach may be rewarded as the company’s share price re-rates higher following the next market correction.

HCI Healthcare, Inc.

As the healthcare supply chain continues to evolve and face increased scrutiny, it’s important for healthcare goods companies to ensure that their supply chains are fully compliant with regulatory standards. HCI Healthcare Inc. (HCI) is one of the leading providers of medical equipment and supplies, primarily in the U.S. HCI’s wide product offerings include respiratory care, diagnostic imaging, vascular access, ostomy, and critical care products. Additionally, HCI operates a network of distribution facilities across the country that serve customers in a variety of industries, including healthcare, hospitality, and food service. HCI boasts a Quality Management System that’s compliant with the Food and Drug Administration’s Quality System Regulation. With that in mind, HCI has established itself as a leader in the healthcare supply chain, and the company’s strong business model has helped it post strong earnings growth in each of the past three years. Although HCI carries a higher valuation than many of its healthcare goods peers, the company’s strong business fundamentals make it worth the premium.

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