The Only Health Care Stocks Immune to “Repeal and Replace”

Written by Adam English
Posted March 11, 2017

Even the most polarizing figure in the world has bipartisan support on this one.

And in keeping with the times and person, a reminder came earlier this week in the form of an early morning tweet:

trump tweet

This is hardly the first time it has come up. Back in January, it was at a press conference where he stated, “They’re getting away with murder.”

Then there is the Time magazine interview. And all the campaign trail quotes.

And of course, there is the conspicuous, and auspicious timing, right as the House GOP unveiled the first phase of its repeal and replace for Obamacare, or the ACA, or whatever you want to call it.

Meanwhile, renewed attention to astronomically high prices and questionable practices involving the orphan drug laws is getting attention from Congress as well.

Quite frankly, if health care costs are going to go down for individuals, states, and the federal government, there is no bigger issue.

And lets not kid ourselves. Drug companies know it too. They have been happy sitting right in the middle of the debate, shrugging off any challengers with the equivalent of, “well what are you going to do about it?”

For decades now, this has been a winning strategy, because no one has stepped forward with a good plan, or been willing to defy one of the most pervasive and powerful lobbying groups inside “The Beltway.”

But the fact remains that this is a wildly popular bipartisan issue, and one that can easily sweeten the deal for any elected official in the House or Senate.

Expect this to stay in the news for months as further details of repeal-and-replace come forward. There is no easier or better way to reduce health care spending across the board.

There is no way around the fact that it is a zero-sum game, and the pressure is mounting. Saving billions, as President Trump has repeatedly promised, for consumers means pulling them directly from the bottom lines of pharmaceutical and biotech companies.

trump tweet stock drop

Every time it comes up, the vast majority of drug and medical device companies will drop like this, but not all of them.

The fastest growing segment of medical stocks are functionally immune.

They already adhere to President Trump’s — and virtually everyone else’s — goals: transparent pricing, strong regulation, and direct competition to prevent price gouging.

Medical cannabis is what we’re talking about here, and it is long past being contentious or fringe.

The North American cannabis market posted $6.7 billion in revenue in 2016, up a full 30% from 2015, according to a recent report from Arcview Market Research.

And that phenomenal growth isn’t an outlier. Arcview projects sales to grow at a compound annual growth rate of 25% through 2021.

At that point, it’s expected to be a $20.2 billion market.

Tom Adams, editor-in-chief of Arcview Market Research, said in a statement:

"The only consumer industry categories I've seen reach $5 billion in annual spending and then post anything like 25% compound annual growth in the next five years are cable television (19%) in the 1990s and the broadband internet (29%) in the 2000s.”

That’s right. The cannabis market is growing as fast as internet companies were in the 2000s.

Of course, the total market size won’t end up the same, no way, no how. But that hardly matters to us.

The growth rate of the companies, and thus the growth of the value of shareholder positions, will present an opportunity that rarely presents itself outside of full-blown paradigm shifts.

And all this is going to happen as prices are dropping due to the exact kind of competition and transparency that politicians on both sides of the aisle would kill to see in pharmaceutical prices.

For example, wholesale prices in Colorado tumbled 24.5% over just the past year.

So far, we’ve only focused on North America, which functionally means the U.S.A. and Canada.

That certainly makes sense. Most of the companies are Canadian, considering the country has a much better defined and robust medical cannabis market dating back to court-mandated regulations between 1999 and 2001.

Same goes for most of the market in developed nations. The people, and more importantly the money to be made, has been almost entirely in North America.

That is changing fast, and international growth is accelerating as well. Just a couple months ago, Germany, by far the largest country in the European Union, passed a sweeping reform bill.

The German parliament voted unanimously to legalize medical marijuana in mid-January 2017, drastically simplify the prescription process, increase the number of eligible conditions, and have implemented policy that will provide health insurance coverage for patients.

Already, German pharmaceutical companies are looking to Canadian and U.S.-based companies to supply medical cannabis.

The infrastructure is in place, the leading businesses are well established, regulatory standards are high, and the price is right.

As strong as growth has been so far, this is just the start of it. We’re witnessing the creation of a whole new pharmaceutical sub-sector.

And while it has panned out, only one person I know has been covering it in depth.

In the last few years, Jimmy Mengel has become one of the world's best authorities on the subject of the North American cannabis industry — focusing specifically on the small start-ups that have sprung up around the opportunity.

He's going to hold a special presentation on March 14th about how to invest in this emerging market, targeting some of the most innovative companies operating today in any industry.

This presentation is open to anyone, but only if you register in advance. Claim your spot as soon as possible.

Just keep in mind there isn’t much time left to register for this free information, or to get in early on the medical cannabis market growth.

Changes this big don't happen often in the market, and they're not happening slowly.

Take care,

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Adam English

follow basic @AdamEnglishOC on Twitter

Adam's editorial talents and analysis drew the attention of senior editors at Outsider Club, which he joined in mid-2012. While he has acquired years of hands-on experience in the editorial room by working side by side with ex-brokers, options floor traders, and financial advisors, he is acutely aware of the challenges faced by retail investors after starting at the ground floor in the financial publishing field. For more on Adam, check out his editor's page

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