Investments in Mental Health Companies Grow, Industry Stocks to Follow Suit

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May. 9 2022, Published 12:02 p.m. ET

Niche investing is one way to track societal shifts. The stock market, often illogical by nature, still does a good job of showcasing a change in real people’s priorities. More people are seeking mental health treatment from psychologists and other professionals, and even online mental health services like BetterHelp and MDLive are booming.

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Venture capitalists are poking their noses into mental health companies. For retail investors in the publicly traded arena, the number of mental health stocks to invest in is growing.

Big investors are taking advantage of the growing mental health industry.

With the normalization and popularity of mental health treatment, venture capital and private equity firms are on a mission to buy out small companies and capitalize on them. That’s why nine startups in the subsector reached unicorn status in 2021, which means that their enterprise valuation surpassed $1 billion.

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Last year, investors acquired 153 behavioral health companies, with most of them stemming from private equity buyouts. So far in 2022, 41 acquisitions have been completed.

Mental health stocks are an option for retail investors.

The rise in mental health industry investments could result in different outcomes. On one hand, it could propel growth for a crucial industry. On the other hand, companies could be forced to prioritize profit over patients, an unfortunate reality that’s entirely plausible under a toxic cocktail of circumstances (like economic troubles and poor leadership, for example).

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Investors who act now could potentially get in on the lower end of mental health stocks as the industry takes flight.

Teladoc Health Inc. (TDOC)

Teladoc Health Inc. (TDOC) is at the helm of the virtual mental health care movement. The company bought BetterHelp in 2015 for just $4.5 million. More recently in 2020, it acquired diabetes health tracking company Livongo for $18.5 billion.

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TDOC stock is up 4.65 percent in the last five years, which suggests long-term potential despite the stock being well below its all-time peak. Investors who enter now are getting a more realistic valuation of the company, whose market capitalization swelled during the COVID-19 pandemic’s stay-at-home stock wave.

On average, analysts agree that TDOC will reach a price point of $57.44 in the 12 months ending May 9, 2023 — up 87.71 percent from the current price of $30.62 per share.

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Eli Lilly And Co. (LLY)

Biopharmaceutical company Eli Lilly And Co. (LLY) has some controversy in its background, including a sex discrimination and harassment lawsuit against company executives that involved parties settling outside of court last year. Still, the stock’s recent correction could pose as an entry point for retail investors seeking a company padded with mental health deliverables.

LLY stock is backed by the company’s drug’s Prozac and Cymbalta (antidepressants) and Zyprexa (an antipsychotic). Unlike many stocks in a struggling market, LLY is up 6.43 percent YTD as of May 9 and 48.49 percent over the last 12 months. On average, analysts predict a 9.91 percent upside for LLY stock in the next year.

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KKR & Co Inc. (KKR)

Private equity firm KKR & Co Inc. (KKR) is investing big in mental health. In 2021, the firm launched its outpatient mental health service arm Geode Health.

KKR expects to pump upwards of $200 million into Geode Health in the future. KKR stock is down 31.37 percent YTD as of May 9. However, analysts remain optimistic about this stock with a 55.25 percent upside potentially on the horizon.

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