Canadian healthcare stocks not typically leaders
On the Toronto Stock Exchange, healthcare stocks are not typically noteworthy due to its limited weight which is currently 1.2 percent in value. On the other hand, that’s about twice its value since analysts in 2017 counseled on excluding the sector from attempts to create balanced portfolios composed of stocks trading on the TSX.
While no one is looking to the healthcare sector, it was revealed in the S&P/TSX Composite Index that two healthcare stocks have been cited in recent boosts to the index.
The two are Canopy Growth [TSX:WEED] and Aurora Cannabis [TSX:ACB], both medical marijuana stocks, that are showing signs of recovery after the post-legalization dip of Canadian cannabis stocks.
Cannabis stocks rebounding
Though the two may not be the ultimate force putting the S&P/TSX Composite Index on the right track, large-cap Canopy Growth and mid-cap Aurora Cannabis are making the healthcare sector and cannabis stocks look a bit stronger overall.
While both have been in retreat over the last few days, each has also shown exceptional growth over the fall and have clearly rebounded from recent declines. Certainly, the current dip could be viewed as a buying opportunity.
Both are constituents of the S&P/TSX Capped Health Care Index and have been in the news with recent big wins. Constellation Brands [NYSE:STZ] announced the completion of its C$5 billion investment in Canopy Growth, while Aurora Cannabis announced strong growth in revenue and earnings.
Small cap healthcare shows bright spots
But not all the action is in the mid and large cap healthcare stocks. Two small-cap stocks have recently received attention. However one has lost momentum while the other looks poised for further growth. In early September an analyst noted the heated action of Savaria Corp. [TSX:SIS] and Viemed Healthcare [TSX:VMD] with the headline “It’s Rare to See Healthcare Stocks This Hot,” a rare yet possible achievement of small health stocks in the market.
Savaria Corp. is noted for strong, healthy revenue growth since 2016. Its focus on equipment for those with mobility issues is believed to have been strengthened with a major acquisition in 2017. So the analyst, who predicted the rising stock price, believes the stock’s drop represents a buying opportunity.
Viemed Healthcare is described as “such a hot stock…an investor could get burned.” It is new to the TSX and not many analysts are covering the stock. Yet they have strong claims to have saved lives with their equipment for chronic lung disease survivors living at home, which is currently giving them much-needed market attention.
Yet since that early report, Savaria Corp. has mostly meandered while Viemed Healthcare has continued its climb. Perhaps Savaria is suffering a bit from being too well known. For some reason, a lack of history sometimes supports the climb of a stock like Viemed. But both are clearly worth watching and considering.
Is healthcare becoming a hot sector on the TSX?
Given the disregard some hold for the healthcare sector on the TSX, one has to wonder if there is a bit of a contrarian opportunity emerging. If select small, mid and large cap healthcare stocks continue to outperform, more and more analysts and investors will catch on and start paying closer attention. If these are the early days of a larger trend, it certainly seems worthwhile to dig a bit deeper and see where the market is headed.