Health IT Poised to Rebound Post-Election

by: Mike Havrilla

As I wrote previously, both presidential candidates are bullish on the healthcare information technology industry – planning to increase spending and investment as a way to improve the quality of healthcare and reduce costs through automation and the widespread implementation of other technologies such as electronic prescribing and computerized medical records. The accompanying table (click to enlarge) highlights the performance over the past year of the ETFI Health IT Index of 38 companies along with the top five rated companies in the index.

Health IT is dominated by small and mid-cap companies, with an average market cap of $1.4B for the entire index. The top 25 rated companies in the equally-weighted index of stocks with market caps of at least $100M U.S. dollars declined by 24% over the past year, but outpaced all benchmark ETFs, including the Healthcare Sector SPDR (NYSEARCA:XLV), Vanguard IT (NYSEARCA:VGT), Technology Sector SPDR (NYSEARCA:XLK), Mid-Cap SPDR (NYSEARCA:MDY), and the iShares Russell 2000 Small-Cap Index (NYSEARCA:IWM).

The top five rated companies offer a mix of large-cap value with Philips (NYSE:PHG), small-cap value with National Research (NRCI) and small-cap growth companies such as Quality Systems (NASDAQ:QSII) and Cardionet (NASDAQ:BEAT). Although the health IT industry is heavily weighted in growth companies which pay little or no dividends, Computer Programs & Systems (NASDAQ:CPSI) and Philips are two companies which are currently yielding at least 5%.