The healthcare information technology [IT] industry represents an estimated $50 billion market out of the $2 trillion that is spent annually in the US for healthcare, based on statistics provided in a recent annual report by UK-based Misys (London: MSY). The industry includes many micro-cap and small-cap companies developing innovative technologies, which often include start-up companies developed by healthcare professionals as an improvement or enhancement to their practice setting. Acquisitions in the healthcare IT space are very common, as a few large and mega-cap companies such as General Electric (GE) and Philips (PHG) simply buy out their much smaller, innovative competitors such as VisICU (EICU), who was recently acquired by Philips at the end of last year and I have previously written about.
To develop an exchange-traded fund [ETF] for the healthcare IT industry, I set a minimum market cap requirement of $200 million and examined stocks based on their trailing 12-month performance and profitability. The screening process resulted in a total of 26 stocks that were eligible for the fund, with the top 22 chosen for inclusion with an average market cap of just under $4 billion. Some of the top performing US stocks in the fund include Cerner (CERN) (up 15%) and Eclipsys (ECLP) (up 19%), which also includes eight companies listed on foreign exchanges. Demand for healthcare IT is poised to experience steady growth due to increased healthcare expenditures in the US and the resulting demand for innovative solutions which can both improve clinical outcomes and save money in the process.
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