What makes up Healthcare Investing anyway?
This is a tougher question than it sounds, as opinions can vary quite a bit and still be perfectly valid. But, since I am running a healthcare port, I think some underlying framing of subsectors is called for, even if just to cause me to consider / reconsider what my opinions are on the sectors. This is a post I've started many times, and never quite finished, largely because my thoughts on the subject were still evolving. They still are and always will be, but not having a defined framework isn't helping with that evolution.
Easiest is to start with Yahoo. Since I do tend to use their industry sorting tools, it is worth noting and maybe even biasing my own framing to theirs.
Yahoo breaks up healthcare into 16 subsectors.
Biotechnology, Diagnostic Substances, Drug Delivery, Drug Manufacturers - Major, Drug Manufacturers - Other, Drug Related Products, Drugs - Generic, Health Care Plans, Home Health Care, Hospitals, Long-Term Care Facilities, Medical Appliances & Equipment, Medical Instruments & Supplies, Medical Laboratories & Research, Medical Practitioners, Specialized Health Services.
Unfortunately, these groupings don't work for me. That is a few too many for my taste and doesn't cover all that I'd like. As few as 8 - 10 is probably a more practical breakdown, but I find I couldn't get my own list under 12.
* Consumer products, services, and retail
-- OTC meds, weight loss services, pharmacies, etc.
* Health Information Technology
-- Specialty IT focused on the health sector
* Health Insurers
-- Self explanatory
* Health Providers
-- Broad topic, hospitals, physician groups, specialty providers, home care, etc.
* Research Equipment and Services
-- A preferred area for me. CROs, lab equipment, etc., I'm wired to think of this area as biotechnology, but many put a different connotation on that term.
* Medical Diagnostics - Products and Services
-- Companies providing diagnostic tests and or lab services
* Medical Equipment and Devices
-- Self explanatory
* Pharmaceuticals - Major
-- Top 15 pharmaceutical firms by sales
* Pharmaceuticals - Development
-- Pharmaceutical companies mostly or entirely in the development stage (what many consider as biotech)
* Pharmaceuticals - Other
-- Pharma companies with products, but not majors, includes generics.
* Health Care and Pharma - Service and Supply Industry
-- Medical waste services, finance, uniforms, bit of a catchall category.
* Real Estate
-- REITS, property managers
This is intended as the top level of a database that will likely be years in the making. How I would default weight these is another question, and one I am still mulling. While I would never be index-like in my own healthcare port, I again think that considering the context on what I am over / underweighted and why can be a useful thought exercise.
For example I had considered the health insurance sector to be one I would avoid until perhaps 2013, when changes from health reform were nearer to being in place. But I missed a substantial rally due to that mindset, probably failing to appreciate that just the removal of a lot of uncertainty was enough to turn the sub-sector.
So to close let me ask, what am I missing? I do feel I've left out something obvious. What company, other than larger conglomerates like GE or Siemens, would I have trouble shoving into one of these categories, but should still consider as 'healthcare'?
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