5 ‘Big Brother’ Stocks I’m Watching Very Closely

Rudy Martin

Earlier this year, I applied for a new life insurance policy. And I was shocked to hear how much the underwriters already knew about me!

Of course, it was an easy sale. After all, they had done their homework on me and were ready to answer my questions and provide the level of services that I sought. In fact, it was almost too easy!

For me, this was a reminder for me that Big Brother is always watching us, and he’s continually in search of a way to make big bucks from our discretionary dollars.

All it takes is the swipe of a grocery-store loyalty card, or handing over your credit card to a merchant or even dropping your business card into a plastic fishbowl at a restaurant that’s giving away free lunches. It’s simple for many advertisers to get a quick, accurate snapshot of not just your spending behaviors, but also the products and services that you might seek in the future.

But before you write off Big Brother as an intrusion or even just an inconvenience, remember this: A great way to beat him at his own game is to buy stocks that benefit from the very software and systems that are designed to track what is beginning to feel like our every move!

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One of the hottest global mega-trends I’m following this year for big-potential investing gains is something I like to call “big data.” And this is just a small example of how it works.

However, don’t mistake big data as just a plain-vanilla play on microchips and processors and spreadsheets. In fact, more and more sectors that have not traditionally been tech plays are fast-becoming the hottest ways to benefit from a growing global appetite for collecting, storing and USING information about you.

Now, I’m not suggesting that big data is all about trying to sell you more stuff. Big data can also benefit you … and the providers you trust to help you.

For example, if you’ve ever visited a variety of doctors over a number of years, you know what it’s like to keep answering the same questions with every new medical professional you meet.

Meanwhile, if they just had access to your complete medical history, they could diagnose you more effectively and treat you more efficiently.

That day is coming sooner than you might think, and it’s already here for many patients around the nation and around the globe!

One Sector Where Big Data

Is Becoming HUGE Business

Thanks to federally mandated electronic recordkeeping, the healthcare sector is giving the big-data trend a major momentum boost.

Back in 2009, the “American Recovery and Reinvestment Act” earmarked $19.2 billion in financial incentives for physicians and hospitals to adopt Electronic Medical Records (EMR) systems under the “Health Information Technology for Economic and Clinical Health Act,” or HITECH.

These payments represent a huge pot of money for companies that specialize in electronic recordkeeping. This also represents a business and investing opportunity with an unstoppable trajectory.

Just how big?

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One Chicago-based technology company’s revenue more than doubled from $548 million in 2009 to about $1.44 billion in 2012. That’s an impact!

A Gold Rush of Opportunity

For Providers, Patients, Investors

Consider this …

  • It’s a huge market. Healthcare spending as a share of U.S. gross domestic product reached an all-time high of 18.2% in 2011, up threefold since 1960.
  • It’s backed by federal law. No amount of legislative interference will stop the inevitable dominance of information-based medical care. The EMR systems and the related technology are too effective a tool to ignore. EMR advocates argue that the technology will not only reduce costs and eliminate administrative waste, but will also enhance the quality of care. It’s a persuasive rationale — one that is now backed by federal incentives and penalties.
  • It costs not to comply. Behind the financial carrots are very big sticks. Adding further urgency to EMR adoption are the strict penalties for not doing so. If an EMR solution is not implemented by 2014, not only will healthcare providers be unable to collect reimbursement, but they also will be subject to onerous financial penalties.
  • It’s more than data. Just purchasing and even installing an EMR system is not sufficient. Healthcare providers seek meaningful, real-world benefits. Applications include mobile medical apps, remote and wireless patient monitoring, point-of-care diagnostics and many other uses. More importantly …
  • It’s a global trend. Electronic medical records have been used for over 10 years in some countries such as the Nordic countries. Anywhere there are growing elderly populations, there is a strong drive to reduce costs.

By healthcare market-research publisher Kalorama’s estimates, in Europe alone, the EMR market reached revenues of $6.8 billion in 2012. There are even-bigger opportunities in places like Asia, too, over the longer term.

It’s about time!

A surge in electronic record-keeping could power tech stocks that specialize in the healthcare field.

Despite significant gains since 2009, however, the U.S. still ranks near the bottom among industrialized nations in terms of adopting EMRs, laying the groundwork for an EMR “gold rush” for at least the next two years as stragglers race to catch up and beat the federal deadline.

In fact, electronic recordkeeping systems in the U.S. are far-more-prevalent in other sectors — such as finance, transportation and manufacturing — than in healthcare.

This is counterintuitive, because healthcare providers and patients could arguably benefit the most from the transition of paper-based to electronic records.

5 Ways to Play This Global Trend

According to Kalorama, five public companies dominate nearly half of the $18 billion EMR market in terms of revenue:

1. Cerner (CERN) is a worldwide supplier of healthcare solutions and services. It aims to optimize clinical and financial outcomes for single-doctor practices, health systems and even entire countries. It also does big business in the pharmaceutical and medical device industries, and for the healthcare commerce system.

2. McKesson (MCK) distributes pharmaceuticals, medical-surgical supplies, and health- and beauty-care products throughout North America. It also develops, implements and supports software that facilitates data integration throughout the health enterprise. In addition, the company offers analytics, care management and patient solutions for payers.

3. Siemens (SI) engineers and manufactures products that support industry, energy and healthcare. This includes creating solutions that provide automation and control, power, transportation, information and communication, and lighting.

4. General Electric Co. (GE) is a globally diversified technology and financial services company. Its products and services include aircraft engines, power generation, water processing and household appliances. It also has a stake in the medical imaging, business and consumer financing, and industrial product segments.

5. Allscripts Healthcare Solutions (MDRX) develops and markets clinical software. Its products include electronic health records, electronic prescribing, revenue cycle management, practice management, document management, medication services, hospital care management, emergency department information systems and home-care automation.

If you’re wondering about the sustainability of this big-data surge in the U.S. healthcare industry, government payments are made incrementally, with larger payments in the early years and lower payments over time, each totaling as much as $64,000 (for individual providers) and up to $11 million (for hospitals), according to formulas that take into account the amount of health services provided.

So my take on it is this: One easy way to keep your portfolio healthy is to consider the big-data trend in global medical care.

We’ve still got a long way to go as a nation to make the move to completely digitized and connected systems. But that’s the direction we’re already heading in, and that’s just one of many exciting (and useful) ways that big data can provide us with a big service … and, for investors, potentially big returns as well.

Best wishes,

Rudy