A sector that walks the line between technology and healthcare has been doing a fine job as of late if the stock prices are any indicator. Many of the healthcare IT companies have not only been hitting two-year highs with the overall market, but they are also trading at the best levels ever. As the healthcare sector finally makes a move into the 21st century, it is only natural that the companies assisting in this change benefit.

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One of the largest and most well known companies in the sector is Cerner Corp (Nasdaq:CERN). Their services include providing electronic medical records at the point of care, as well as training and healthcare service analysis. The company basically covers the entire gamut of IT services used by the healthcare industry. The stock could be considered expensive with a forward P/E of 27.9 and a price-to-sales of 4.6. A good strategy for buying would be to wait for a pullback from the $100 level it hit the first trading day of February.

One of CERN's close competitors is Quality Systems (Nasdaq:QSII), also trading near an all-time high. The two stocks have similar chart patterns and both have lofty valuations. QSII is trading with a forward P/E ratio of 29.4 and a price-to-sales of seven. The company concentrates on three areas within the industry: dental, ambulatory product suite with electronic health records, and consulting services for the medical field. Similar to CERN, the strategy for purchasing QSII would be a pullback near the $75 per share area. (For related reading, check out 5 Healthcare IT Stocks To Know.)

Medidata Solutions (Nasdaq:MDSO) is not as large of a company as the first two, but that hasn't stopped the stock from nearly doubling in price over the last eight months. The company is a bit different because its software solutions are geared towards life science companies that are trying to achieve certain clinical results. Their customers range from biotech firms to academic institutions working on new medical trials. Fundamentally, the company is slightly more attractive with a forward P/E ratio of 21.9 and a price-to-sales of 3.8. And technically the stock is off its recent all-time high and is considered a buying opportunity this week. (For more, see Can Investors Trust The P/E Ratio?)

Allscripts Healthcare Solutions (Nasdaq:MDRX) is composed of two business segments: clinical solutions and health solutions. The clinical solutions side of the business helps big and small medical offices with their businesses as well as electronic prescriptions. The health solutions segment provides offerings for hospitals that help streamline the patient experience as well as post checkout. Technically, the company has not done as well as the first few stocks and is well off its all-time high. Fundamentally, the company is expected to trade with a forward P/E ratio of 23.7, basically in line with the sector. Due to its lack of ability to join in the rally, I would recommend looking to one of the first three stocks as the best plays for the sector.

The Bottom Line
Keep in mind that even though the four stocks are similar, each has its own niche in the industry. And just like any industry, there will be winners and losers. The healthcare IT sector in particular could benefit from top to bottom as more government spending helps push the industry into the 21st century. There is also the fact that better technology will lower cost for healthcare providers, insurance companies, and the patients, which is a winning situation for everyone. All in all, it appears the current bullish trend will continue into 2011.


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Tickers in this Article: MDSO, CERN, QSII, MDRX

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