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There's Plenty More Upside in This Boondoggle

By Rob Fannon, editor Phase 1 Investor
Friday, March 27, 2009

Last November, my colleague George Huang showed you how to collect 30% gains in a year in some of the world's best medical businesses.
 
He was talking about the health care IT sector... These companies are helping America's old-fashioned hospitals and medical centers switch from piles of manila folders to streamlined computer systems.
 
As George pointed out, Obama had pledged $50 billion to help the transition. For a $10 billion industry, that's quite a boost. But at the time, no one was paying attention. Investors were focused on Obama's "green" initiatives and piled into solar stocks and wind-energy producers...
 
Well, the green energy ETF (PBW) is down about 12% since then, along with the S&P. But health care IT is up about 11%. Take a look...
 
Company
2008 Revenue
Market Cap
Return Since November
McKesson (MCK)
$2.8 bil
$10 bil
-2%
Cerner (CERN)
$1.7 bil
$3.7 bil
21%
Eclipsys (ECLP)
$516 mil
$560 mil
-28%
Quality Sys (QSII)
$230 mil
$1.3 bil
21%
Allscripts (MDRX)
$680 mil
$1.6 bil
50%
Athenahealth (ATHN)
$140 mil
$840 mil
-4%
HMS Holdings (HMSY)
$184 mil
$780 mil
22%
 
George's prediction is right on track. And I think the trend is just getting started...
 
Despite consuming the largest chunk of our economy (20% of GDP), health care is one of the least automated industries.
 
Every grocery store in America uses inventory software to keep track of each bottle of soda and box of Cheerios. But only 20% of U.S. hospitals use it to keep tabs of their codeine and syringes. Banks, credit-card companies, and stock brokerages let their customers handle sensitive transactions over the Internet. Heck, even the IRS lets you file your taxes online. But doctors and hospitals still store medical charts in stacks upon stacks of filing cabinets.
 
It's a joke. Actually, it's worse than a joke, it's an outrage...
 
Every year, 100,000 patients die from medical errors. That's more than car accidents, breast cancer, and AIDS-related deaths – combined. Adopting modern recordkeeping could save untold numbers of lives every year.
 
This technology lag is part of the reason the U.S. health care market is so bloated. Up to 30% of medical dollars are wasted on administrative drivel. That's $600 billion. Even so, doctors and hospitals have been unwilling to cough up the costs of upgrading their IT. And that's where President Obama comes in...
 
On the campaign trail, Obama promised to rein in health care costs. And he's betting an overhaul of the nation's health care IT is the best place to start.
 
Naturally, he's tackling the issue by throwing heaps of taxpayer money at it. Obama has dedicated $20 billion of the $800 billion stimulus package to subsidize IT upgrades. And that's just a down payment on his $50 billion campaign promise.
 
Thanks to the Obama administration's bottomless checkbook, I believe we're going to see a huge wave of money heading into the stocks I listed above. And I'm confident we're at the very beginning of this trend...
 
Good investing,
 
Rob




In The Daily Crux
Market Notes
Tech stocks lead the market... Technology fund XLK approaches three-month highs.
 
BestBuy skyrockets... Better-than-expected earnings boost shares 13%.
 
Mortgage rates lowest ever recorded... 30-year fixed rates hit 4.85%, is it time to refinance?
 
Earnings today... Finish Line, KB Home, Humboldt Wedag.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 38.31 +1.4% -0.6%
Gold 138.07 +2.1% +16.3%
Silver 28.60 +2.4% +53.6%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 18.01 -7.1% -19.8%
Gold Stocks 581.56 +3.0% +17.0%
10-Year Yield 3.02 +0.7% -10.7%

World ETFs
Symbol Price
Change
52-Wk
USA 122.89 +0.3% +11.3%
Canada 30.50 +0.2% +16.2%
Russia 21.94 +1.4% +18.1%
India 37.85 +0.3% +22.3%
Israel 16.69 +1.3% +10.8%
Japan 10.64 +0.6% +6.5%
Singapore 13.73 -1.1% +18.8%
Taiwan 14.78 +0.4% +19.2%
S. Korea 57.31 +1.3% +23.4%
S. Africa 71.87 +1.4% +28.2%
China 44.42 -1.4% -0.6%
Lat.America 53.17 +0.7% +8.4%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 137.59 +1.0% +18.9%
Big Pharma 64.14 +0.0% -3.2%
Internet 72.07 -0.1% +23.4%
Semis 16.22 +1.2% +29.4%
Utilities 31.28 +0.2% +1.5%
Defense 18.52 +0.1% +10.6%
Nanotech 10.03 +0.4% +1.6%
Alt. Energy 10.08 +1.3% -3.3%
Water 18.49 +1.0% +14.5%
Insurance 16.14 +0.4% +21.1%
Biotech 20.54 -0.2% +28.1%
Retail 19.70 +0.3% +30.2%
Software 24.79 +0.8% +25.9%
Big Tech 53.87 +0.3% +22.7%
Construction 13.10 +0.9% +15.7%
Media 13.64 +0.5% +26.0%
Consumer Svcs 67.39 +0.2% +24.5%
Financials 55.04 +0.3% +7.4%
Health Care 64.30 +0.1% +2.0%
Industrials 63.54 +0.5% +21.0%
Basic Mat 74.35 +1.1% +25.3%
Real Estate 55.32 +0.1% +25.0%
Transportation 91.77 +0.7% +26.9%
Telecom 22.59 +0.5% +17.8%