No matter your politics, the stakes of the November midterm election are high.
It’s going to decide control of Congress, the direction of the nation, perhaps even the fate of Donald Trump’s presidency.
That said, the No. 1 issue for voters isn’t any of that.
According to recent polls by NBC News/The Wall Street Journal and the Pew Research Center, it’s healthcare.
Specifically, healthcare affordability.
After all, half of U.S. adults say that one large medical bill would force them to borrow money. One big medical bill could spell financial disaster for the majority of Americans. Today, 62% of bankruptcy filings are due to medical bills.
Problem is, there’s no easy answer to this issue.
U.S. President Donald Trump and seemingly half the nation want to gut the Affordable Care Act (ACA), while the other half wants to go all the way to a single-payer system.
Given the nation’s deep political divide, this would seem a terrible time to invest in healthcare. And overall, that’s right.
But I believe you can make a bundle defying that sort of conventional wisdom.
That’s why today I want to reveal a healthcare company that is actually addressing people’s No. 1 issue by helping them reduce their healthcare costs.
And it’s making its investors a ton of money by doing so.
In fact, it’s beaten the market by 1,440% over the last year.
But it’s not done yet – healthcare consumers are going to need its services for years to come, no matter what happens to the ACA.
That’s why I believe it will double in the next two years.
Or sooner…
Premium Product = Premium Returns
I don’t care what your politics are.
I don’t care if you love Obamacare – or if you’re rooting for its end.
Either way, you’re here for the best investment opportunities I can find.
And the fact is that the health insurance management firm I’m about to tell you about is poised to deliver great earnings reports – and a soaring stock price – for years to come.
No matter what happens in November.
And that’s because it offers health savings accounts (HSAs) – a premium (i.e., high deductible) health insurance management tool that both customers and employers love.
HSAs let you set aside money on a pretax basis to pay for their future healthcare needs – for deductibles, copayments, coinsurance, and other medical expenses. Because those dollars are untaxed and held in a savings account, you can lower your healthcare costs.
It’s the sort of effective system that well-paid workers are willing to pay a premium for.
Employers love this program, too. Sponsoring a health plan with an attached HSA can save a company thousands of dollars per worker. Plus, it gives employees more doctor choices – and you get happier employees.
No wonder HealthEquity Inc. (Nasdaq: HQY), one of the nation’s largest HSA managers, has gone on a sales and earnings tear.
I’ll show you the details in a minute – but make no mistake. This is a firm with eye-popping growth.
With that in mind, let’s run it through Your Tech Wealth Blueprint – the five filters we use to spot highly lucrative tech plays.
Before they take off…
Tech Wealth Rule No. 1: Great Companies Have Great Operations
We look for well-run firms with top-notch leaders.
HealthEquity is lucky to have Jon Kessler as its CEO. He is nothing short of a deep expert on health insurance and Washington’s healthcare policies.
Kessler holds a master’s degree in public policy from the John F. Kennedy School of Government at Harvard University. He also has a U.S. patent on methods for electronically adjudicating pretax healthcare and other expense transactions.
Even better, he is a successful entrepreneur. He founded WageWorks Inc. (NYSE: WAGE) in 2000. Before WageWorks went public in 2012, this provider of tax-advantaged programs for employee benefits made it onto the Inc. 500 list of fastest-growing private companies three years in a row.
And since 2009, when Kessler joined the company as CEO, he’s been bringing that growth-centric mindset to HealthEquity.
Tech Wealth Rule No. 2: Separate the Signal from the Noise
To create real wealth, you have to ignore the hype and find companies with rock-solid fundamentals.
Healthcare and biopharmaceuticals have largely been out of favor on Wall Street since President Trump took office in January 2017. The thinking was Trump’s populist politics and his criticism of drug prices would hurt the sector.
To some extent that’s true. The bellwether iShares Dow Jones U.S. Pharmaceutical ETF (NYSE: IHE) has gained just 10% since 2017’s first trading day, less than half the S&P 500’s 25% return.
But when it comes to individual stocks, that’s just “noise.”
Here’s the “signal.”
During that same stretch, HealthEquity roughly doubled in value, beating the market by fourfold and the health sector by nearly 1,000%.
Tech Wealth Rule No. 3: Ride the Unstoppable Trends
We look for stocks in red-hot sectors because they offer the best chance for life-changing gains.
While the healthcare sector is in the doldrums, HealthEquity finds itself in a red-hot trend. Health savings accounts continue to grow in popularity. That’s not surprising, as employers like the cost savings, and workers love having more choices.
The numbers bear it out.
The share of HSAs in the insurance market has more than tripled since 2010, when it stood at 6%. Today, HSAs make up 19% of the health insurance market. HSAs now hold nearly $45 billion nationwide. That’s up from less than $10 billion since the 2010 passage of the ACA.
For its part, HealthEquity has roughly $7 billion in assets under management – and says its total addressable market could hit $1 trillion in assets.
Tech Wealth Rule No. 4: Focus on Growth
Companies with the strongest growth rates almost always offer the highest stock returns.
HealthEquity grew sales in its most recent quarter by 26%, which means it is growing eight times faster than the economy. But its three-year average is even better, coming in at 36%.
That means, on average, the company doubles its sales roughly every two years. No wonder it has increased its market share for eight straight years.
The company has 3.5 million accounts under management, representing some 40,000 employers.
Tech Wealth Rule No. 5: Target Stocks That Can Double Your Money
This is where we look at the firm’s earnings growth and see how long it will take to double profits. By doing that, we can figure out how long it should take the stock to double.
I’ve gone through HealthEquity’s financials in detail, and I’m projecting earnings per share will grow by an average 36% over the next three years. Bear in mind, that’s a conservative estimate.
See, over the past three years the firm has averaged 42% earnings-per-share growth. That figure climbed to 63% in the most recent quarter. To be cautious, I gave the three-year average a 15% discount.
Now we use what I call my Doubling Calculator. Divide the compound profit growth rate of 36% into the number 72.
The stock trades at roughly $80, giving it a $5 billion market cap.
But it won’t be there for long.
My calculations show that we can expect a double – triple-digit profits – in just two years!
This is one of those stocks where it really pays to ignore all the political noise out there and grab a stake.
By doing so, you will see the value of your portfolio rising robustly – no matter what happens with the fall elections.
— Michael A. Robinson
Source: Money Morning