Should Investors Buy These Health care Stocks When They Dip?
Traditionally, investors tend to look for best health care stocks to buy during uncertain times. This is because when everything goes south, the demand for health care services and products will generally be relatively unaffected. Now that we have the combination of the coronavirus pandemic, rising geopolitical tensions and global recessions, this should theoretically send investors to look for defensive investments, and top health care stocks could be attractive.
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However, if we look at the broader market trends since March, this isn’t the typical results we would have expected. Looking at the largest health care ETF, the Health Care Select Sector SPDR Fund (XLV Stock Report) has gained just 4.42%, only modestly ahead of the 2.15% gain in the S&P 500. And if we compare it to the Nasdaq Composite, which has jumped more than 20%, we would understand how health care stocks have been mixed. Of course, there are a few aggressive health care stocks in the market, notably Novavax (NVAX Stock Report), and Moderna (MRNA Stock Report).
The market has richly rewarded them for their stellar growth, and some are beginning to wonder if the valuation is justifiable. But don’t get me wrong though. Should their vaccines indeed be successful, their value will go off the roof. But for now, it is still quite speculative.
One company whose earnings report didn’t seem to receive that much attention was Livongo Health (LVGO Stock Report). The company which specializes in diabetes glucose monitoring reported blockbuster results. But many investors seem to be more interested in the news of the company’s acquisition by Teladoc Health (TDOC Stock Report). Both Livongo and Teladoc dropped sharply, but perhaps that is just a knee-jerk reaction. It may be worthwhile to take a closer look at LVGO Stock and TDOC stock to see if they are worth buying during the dip.
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What Does The Deal Mean For Livongo & Teladoc Stock Investors?
Livongo Health is one of the best health care stocks to buy this year. It was only $25 a share during the beginning of the year. LVGO stock has soared over 400%. The coronavirus pandemic hit the sweet spot of the company’s digital health management platform. Managing chronic conditions becomes easier and more affordable. And as a result the company saw a surge of patients joining its service. Livongo now counts more than 410,000 members using its glucose monitoring, up 113% year over year.
Yes, I get that Teladoc has grown at a healthy rate, and even accelerated during the pandemic. As a result, TDOC stock has surged more than 140% year to date. The surge in TDOC stock is not surprising as the demand for remote health care services appears to be solidifying, and more consumers are getting more comfortable in the remote setting. But the truth is, Teladoc’s revenue growth is no match for Livongo. Many investors would prefer these two companies operate on their own to benefit solely from their own businesses respectively.
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Should You Buy TDOC Stock & LVGO Stock Now?
For long term investors, the major question is whether both will benefit tremendously from the new synergy. Or will the merger simply drag down the growth for both companies? And for potential investors who wish to buy these two health care stocks on their dip yesterday, your best bet is to hope that the newly merged company will come up with a new strategy to ensure their businesses continue to be sustainable in the long run.
Perhaps this could be the digital health platform everyone in the industry has been waiting for. After all, digital health is a platform play which benefits from scale. And the combination of these two companies’ user base and range of services might just produce the winner.