As investors, we're all looking for the next big thing. We can start doing our research in advance, understand who the players are and who we think will win/lose. So when I look at the current environment for what's driving growth, I'm seeing many of the same things you do.
Based upon most empirical evidence as well as many IT spending surveys performed by investment banks, much of the growth in the IT sector is being driven by various combinations of mobility, ecommerce, the cloud and data analytics. These technologies have transformed how we shop, the entire financial services industry, IT departments in almost every industry and much, much more.
Our banks can tell when our credit cards are being used maliciously, Amazon (NASDAQ:AMZN) drives significant growth from recommendations they think you'll like and a Boeing (NYSE:BA) 787 can detect a future problem on an in-flight plane and notify an airline for a pre-emptive fix to keep it generating revenue. The list of beneficial applications of technology is limited only by the imaginations of the people applying it and the cost.
But the one area that has been largely untouched by technology and, I believe, is on the cusp of a revolution is the healthcare industry over the next 3-5 years. Historically, healthcare has been one of the smallest end-markets for technology spending. Yes, they do accounting like everyone else but other sectors have transformed the front-end of their operations to competitive advantage and that has not happened in healthcare.
Functionally, healthcare is in the dark ages and, realistically, the doctor/patient relationship hasn't changed very much in the last century. Yes, they use some new toys but it's still very limited. Part of the reason has been cost but part of it too has been the lack of information. For example, I have hypertension. For that, I visit my physician a couple of times a year and he takes my blood pressure. Fortunately, I also take my blood pressure at home a couple of times a day so the doctor looks at my pretty Excel graph and decides if we need to adjust a medication. After that, the data is gone and it really has no context relative to anything else wrong with me.
So what can bring about the big changes I'm suggesting? Last summer, I saw a presentation by Intel (NASDAQ:INTC) when they announced a partnership with the Michael J. Fox Foundation (MJFF) for Parkinson's Research. I feel certain that some of you have much more first-hand information on this disease than I, but what struck me as I explored the subject was the terribly unsophisticated approach to a disease in the twenty-first century. For those unfamiliar, 1% of people over the age of 60 will be "diagnosed" as having Parkinson's. There is no test for it and the diagnosis process has not changed in more than a century. The testing is completely subjective and, therefore, prone to interpretation. And unfortunately, once the diagnosis is arrived at most of the brain cell damage has been done.
INTC created a wearable sensor that can capture information about the patient's gait, tremors, balance, sleep patterns in addition to all the "usual stuff." Rather than having a few largely subjective data points a year, the sensors captures 300 data points/second and transmits those, via your smartphone, to a database in the cloud. With 2000 patients that's the equivalent of one Library of Congress created each month. The cloud in this case is Amazon Web Services and they're hosting a Cloudera instance of Hadoop. INTC data analysts coupled with researchers from the Parkinson's community are combing the data attempting to find markers or predictive events that may help better understand the disease, lead to earlier diagnosis, determine the efficacy of treatments and, maybe someday, lead to a cure. And Parkinson's is only one of the many chronic diseases we face.
The US Center for Disease control estimates that 117 million Americans have a chronic disease of some form. That's one third of the population. So it's a large potential market.
What "things" can we sense you may ask? From what I can tell from my research, it's fairly broad: blood oxygen, blood glucose level, heart rate, heart rate variation, body sounds (no idea what that is), ECG, EEG, gait, hearing, vision, hydration, skin temperature, blood pressure, respiration, sleep quality, location and I'm certain there are more.
How do we do it? The sensors can be active (requires work by the patient), passive or partially passive. They might be wearables such as on the wrist, a patch, under the skin, vests, jewelry, shoes and again, I've probably missed some. They may be ingestible such as event markers (Did Mom take her meds today?) or camera pill.
One of the places I found particularly helpful on this topic and the reason I believe that we're on the cusp of a revolution is the very intense, active participation of the technology and healthcare industries within our universities. It seems as if every major medical school is teaming up in some way with their engineering school counterparts. University of Southern California has their Center for Body Computing, University of California at San Diego their Center for Wearable Sensors, the University of Michigan has the Center for Healthcare Engineering & Patient Safety. And those are just a few of the many.
For those of you who were Star Trek fans, the Qualcomm (NASDAQ:QCOM) Foundation (different from the company) is currently running an international contest called the Tricorder X Prize. It's a $10 million award for the team that comes the closest with the winner to be announced in 2016.
Apple (NASDAQ:AAPL) generated a great deal of interest with its introduction of the HealthKit application for iOS devices late last year. And introducing ResearchKit for the health research community generated a lot of enthusiasm from many institutions.
So now, you're asking, "OK, how do I invest in this?" Today, it's not that easy but there are a few obvious beneficiaries with INTC at the top of that list. Particularly when it comes to the data analytics side of this equation, Altera's (NASDAQ:ALTR) FPGAs will be something very valuable to have. But keep in mind that I'm not advocating buying INTC today for something that will impact it three plus years down the road.
We're talking very big data here (one 787 trip generates 500 GB) so the traditional database suppliers are probably out but the Hadoop variants certainly play. Cloudera is private but Hortonworks (NASDAQ:HDP) is recently public. With all the interest in data analytics today, these companies are likely to see solid growth for some time but HDP carries a hefty valuation.
The companies that make the sensors today are predominately the analog semiconductor names. Unfortunately, some are large enough that this may not impact the top-line very much any time soon. However, I do expect we'll be seeing a number of private companies grow out of many of the university programs and, ultimately, some will go public.
The thing to do now is your research. Find sources of information to monitor what interests you and monitor events as they take place. If I'm correct, what we'll begin to see over the next several years will make the Tricorder look positively… quaint.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.