Tuesday, June 09, 2015

LabCorp: Investor Beware

We've been customers of Laboratory Corporation of America (LabCorp, ticker: LH) for nearly 20 years, ever since LabCorp began offering
hundreds of tests on blood, tissue, urine, and worse [blogger's note: the Barron's columnist's diffidence is charming], generally providing results within 24 hours, using 39 primary labs across the country and 1,750 patient-service centers.
LabCorp's rates are a fraction of those charged by hospital labs. It has been a preferred provider in every medical insurance plan we've participated.

Barron's likes LabCorp's positive fundamentals: increased demand for services, Medicare's greater scrutiny that favors low-cost providers, synergies from a recent merger, and overhead cost-cutting. And LabCorp has a history of outperforming the stock market (chart below).

LH's appreciation is double that of the S&P 500 over the past 10 years.
LabCorp has a great story, but I'm not planning to invest. Technological disruption is looming.

Item: A cheap new test can reveal every virus that invaded you—and help stop infections. The cost is $25.

Item: Palo Alto-based Theranos can run hundreds of tests quickly using only a few drops of blood. Theranos testing is already available at Walgreen's.

LabCorp's business model is vulnerable. Investor, beware.

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