ScoPo’s powerplays: Healthcare hit by ‘Covid exit trade’, but opportunities remain
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Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 24 years, explains what the movers and shakers have been doing in health and gives his ASX powerplays.
“It’s pretty buoyant at the moment,” says Scott Power. “We’re seeing a lot of a rotation out of health care and tech and into energy, banking and travel. It’s referred to as a Covid exit trade.”
The health care sector finished the week down 2.83 per cent, although it’s still up four per cent for the month.
Meanwhile ASX200 closed the week up 0.95 per cent, and is up 11.4 per cent for November – putting the index on pace to eclipse April as its best month since its inception in 2000.
Financials are collectively up 17 per cent in November and energy companies up 29.8 per cent, while that other growth sector – tech – is up just 4.3 per cent.
Still there’s been some bright spots out there for life sciences investors.
It was one of a number of companies that Morgans had to adjust price targets for because they have busted through the stockbroker’s forecasts.
Morgans now has a target of 20c on Impedimed, up from 14c.
“It looks like it’s going higher,” Power said.
Morgans has also raised its price target on Micro-X (ASX:MX1) from 32c to 50c. The mobile X-ray company’s shares finished the week at 34.5c, up 1.5 per cent from last week.
Morgans has downgraded both companies from a buy to a hold, on valuation grounds.
Sonic probe sterilization company Nanosonics is up 29.1 per cent for the month, to $6.65.
The company has positive sales momentum but has yet to announce details of its next-generation product launch, Power said.
“There’s no clarity around it,” he said.
Virtus is up 45.3 per cent for the quarter, to $5.61, but Power says demand for IVF cycles will likely normalise next year.
Meanwhile, Telix Pharmaceuticals (ASX:TLX) finished the week up 16.1 per cent to $3.25 after the nuclear medicine company made progress about its prostate cancer diagnostic.
“It’s had some very successful meetings with the FDA,” Power said.
Rhinomed (ASX:RNO) finished the week down 5.4 per cent to 17.5c despite successfully registering its easy to use nasal swab with the Australian Therapeutic Goods Administration.
Mesoblast (ASX:MSB) finished the week up 11.8 per cent to $4.07, after last Friday announcing it was partnering with Novartis to develop its remestemcel-L stem cell drug as a treatment for acute respiratory distress syndrome.
“This has been with us since March,” Power said. About 60 per cent of the 160 life sciences companies on the ASX have raised money since then, and another 20 per cent don’t have to because they’re profitable.
The capital raisings are “good news,” Power said, since they mean these companies are well-funded to proceed with production registration and clinical programs.
Power is watching biotech company Antisense, which is investigating new indications for its mRNA therapeutics it has licensed from Ionis Pharmaceuticals (NASDAQ:IONS).
“That will be a positive announcement when that comes,” Power said.
Swift is a “closed loop” entertainment and communication company, delivering video on demand to aged care homes and mining camps.
“It’s got a health thematic to it, so we think that’s worth having a look at.”
Overall Power is cautious about a possible spike in COVID-19 cases in the United States with the Thanksgiving holiday there.
He says while the rotation into cyclical stocks is a trend that bears watching, people will still need things like X-rays and medical treatment regardless of whether the global economy starts returning to normal.
“As things get back to normal, health is still a big component of day to day life.”
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