While we’re not quite ready to pull on the trigger on any new names, this recent correction could create some buying opportunities. Health care is one sector we are closely watching, and I’d like to share with you why it’s under our microscope, and the kind of companies we’re considering.

Granted we do think some parts of the market have gotten a bit overvalued, particularly some biotech companies, but in all the sector still shows great promise for a couple of reasons.

First and foremost is simple demand. Earth’s population currently comes in at more than 7.3 billion souls and that number is expected to hit an 8 billion by 2024. While it took nearly two millennia for the global population to reach 1 billion in 1804, it has grown exponentially from then, and that growth rate will only accelerate. Much of the growth also happens to be occurring in less developed parts of the world, where many of the indigenous diseases are either undertreated or simply untreatable.

Attacking Malaria

For instance, while treatments for malaria have existed for more than a century, they aren’t always 100% effective. That’s why malaria eradication efforts have mostly focused on destroying mosquito populations and distributing sleeping nets to help prevent bites. It is also why the initial approval of GlaxoSmithKline’s malaria vaccine by the European Medicines Agency back in July has been such big news.

The vaccine isn’t nearly as effective as many had hoped, particularly for infants. It also requires three booster doses a month apart, complicating the logistics of administering it in the underdeveloped areas where the disease is most prevalent. That said, it cut cases of severe malaria by a third over four years of trials and is the first vaccine against a parasitic disease in humans.

Despite the fact that Glaxo (NYSE: GSK) has put more than 30 years of effort into its development, it has pledged to make the vaccines available at just a 5% markup so it won’t be hugely profitable. But it does mark a shift in strategy on the part of drug makers to begin focusing on more exotic diseases precisely because those diseases occur where health care demand will grow the most in the coming decades. That’s why Glaxo has invested so heavily in developing its emerging markets distribution channels.

With a first-of-its-kind vaccine opening doors to other new drugs, GlaxoSmithKline is a buy up to $54.

The second reason the sector is so promising is technological innovation and advancement.

Genetic Solutions

For instance, while we talked a lot about “personalized medicine” a decade ago thanks to gene sequencing, it was still largely a pipe dream. But thanks to advancements in the fields of genetics and oncology, companies such as Agenus (NSDQ: AGEN) are now using a patient’s own cancerous cells to make vaccines against the disease, essentially training their bodies to fight the malignancy. While those technologies are still at least several years away from general use, they are a growing reality. Incidentally, Agenus was also involved in the development of Glaxo’s malaria vaccine, providing a compound found to boost the body’s immune response to vaccines.

But just as personalized medicine was once merely an idea on the drawing board, today research is being done into the role nanotechnology can play in medicine, such as developing nanobots that can destroy cancer cells or infection. Or using platforms such as Intuitive Surgical’s (NSDQ: ISRG) Da Vinci Surgical System to perform operations remotely. Or developing artificial limbs that, through the use of sensor systems, can actually detect brain signals to improve fine motor coordination.

While most of those ideas are still in an early stage of development, further along in the process are companies such as Organovo. Using living human cells, it uses the biological equivalent of 3D printers to produce structures that mimic the form and function of living human tissue structures. Its products are currently mostly used in clinical testing, such as examining the impact a potential new drug could have on the liver or kidneys. Earlier this year, it also established a partnership with L’Oreal USA, a subsidiary of one of the world’s leading cosmetics makers, to develop skin tissue for testing purposes in order to reduce the need for animal testing.

While still a highly speculative venture, the hope is that one day Organovo will be able to produce fully functional human organs using its bio-print technology, helping to at least reduce the need for transplanted organs if not totally obviate it.

We wouldn’t suggest buying stock in Organovo at this point, particularly since it doesn’t pay a dividend, but it’s a terrific example of cutting edge technology that is increasingly being commercialized. And with a growing market for health care products of all sorts, it’s also an excellent example of why we are watching the health care sector so closely.