The most recent significant developments in the sector were the return of big pharma mergers and the initial outlines of Barack Obama’s healthcare policies. Both events unsettled the markets, at least temporarily. Healthcare performed in line with the broader markets, as these rallied late in the quarter on better-than-expected economic data and signs of a financial system stabilization. Not surprisingly, biotech stocks did better than the rest of the sector, courtesy of their stronger fundamentals.
We think that the first moves of the Obama administration in the field of healthcare policy are consistent with the outlines provided during the campaign. Universal
healthcare in the US will benefit the industry by pulling in some 50 million new consumers, representing a market expansion of 10% to 15%.
It may be premature for the financial markets to re-orient themselves on a sustainable upward trend, but signs of stabilization have definitely started to appear. We think it is time to become a bit more aggressive in accumulating companies with exposure to emerging markets. In particular, we like generic players as well as some of the less defensive healthcare names such as medical technology companies Thoratec, St. Jude or Varian.
We also like big pharma companies for the incredible value their stocks represent and their defensive characteristics. After the recent mergers, Pfizer and Merck are now our top picks ahead of the European players. Among biotechnology stocks, the “Obamacare” landscape has provided some attractive entry points in stocks like Celgene, Gilead Sciences and Genzyme, although the latter has been hit by specific manufacturing-related concerns. We continue to stay away from small-cap biotechs as a group because of financing difficulties in the current environment but acknowledge that there is tremendous value in selected situations, in particular for investors with a long investment horizon.
Den gesamten Newsletter finden Sie (in englischer Sprache) als PDF - Download in unserem Info-Center!
