ScoPo's powerplays: 'It's going to be a great run into 2021'

It’s been a great week for the market but health stocks have lagged as investors flocked to “covid-exit” trades with a working vaccine apparently just months away
Fertility companies Monash and Virtus had a good week though, as did cancer testing company Rhythm Biosciences
Power’s picks are Micro-X and Mach7 Tech, and he is predicting a bull run for the end of the year

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.

Themes of the week

It was a momentous week that began with US media calling the presidential election for Joe Biden over the weekend and ended with news that Pfizer and BioNTech had a working coronavirus vaccine.

“The market got very excited about the election results, and that was seen to a positive with the apparent Biden win and Republicans having control of the Senate,” Power says.

“That’s what the market wanted, a bit of certainty.”

And there’s going to be more vaccine news to come soon from Johnson & Johnson, Moderna and AstraZeneca that could keep the market buoyant, Power says.

Healthcare stocks have lagged the broader market this week after outperforming it recently. Shortly after noon on Friday the sector was up 1.5 per cent for the week, compared to three per cent for the All Ordinaries and 3.1 per cent for the benchmark ASX200.

“We’re seeing a bit of rotation out of high-value stocks and into what they’re calling COVID exit trades,” Power said, referring to stocks in industries like travel that have beaten down during the pandemic.

Webjet (ASX:WEB) was on pace to close the week up 16.7 per cent on Friday afternoon, while Qantas (ASX:QAN) and Scentre Group (ASX:SCG) were both tracking up 10 per cent.

But health care investors did get a boost with gains for fertility companies Monash IVF (ASX:MVF) and Virtus Health (ASX:VRT). The former was up 14 per cent for the week to 71.5c, while the latter had gained four per cent to $4.97, as of Friday afternoon.

Both companies had run through Morgans’ price targets of 65c and $4.54, respectively, following positive news about IVF cycle numbers rebounding now that the coronavirus situation has eased.

Rhythm Biosciences (ASX:RHY) was up 44 per cent for the week to 36c, following validation of its prototype colorectal cancer blood test. Its shares are up nearly 600 per cent in eight months.

Medlab Clinical (ASX:MDC) was down three per cent for the week, to 19c, despite announcing its NanaBis cancer bone pain trial had been accepted into UK’s National Institute for Health Research portfolio, meaning the phase 3 study will receive support in set-up, recruitment and delivery in its UK arm.

“That’s one of the quality medical cannabis plays,” Power said of Medlab.

Alcidion Group (ASX:ALC) was up 44 per cent to 18c after the healthcare information company signed a $9.5 million deal with a hospital trust in the United Kingdom.

Impedimed (ASX:IPD) was up 10 per cent to 9c after winning a second AstraZeneca contract. The Brisbane-based bioimpedance spectroscopy device manufacturer has been Power’s “powerplay” pick for several of the last weeks, but still hasn’t delivered the metadata analysis he’s been waiting for to hopefully drive its stock higher.

Antisense Therapeutics (ASX:ANP) looked set to close the week flat at 10c after a $7.3 million capital raising (Morgans was the joint lead manager) at 10c a share to fund its phase 2b trial of its possible Duchenne muscular dystrophy trial.

Healthcare companies are still finding it easy to raise money, Power noted.

ScoPo’s powerplays

Power sees further upside in Micro-X (ASX:MX1), whose shares are up 35 per cent so far this month, to 25c, after winning a US government contract to build a prototype airport self-screening scanner.

A decision about a possible grant from the Australian Stroke Alliance in the next month or so could push the Adelaide company’s shares higher, Power said.

Power is also a fan of Mach7 Tech (ASX:M7T), whose shares on Friday afternoon were up 18.6 per cent for the week to $1.115, after the healthcare image management platform announced a $5.3 million contract with US healthcare company Trinity Health.

Morgans has a price target of $1.49 on the company and Power expects more contracts to be announced in the coming months, hopefully before Christmas.

In summary, says Power, “I think the big message is just staying very positive. There’s a lot of liquidity out there, and good news is going to be rewarded.”

While there’s still some risk Donald Trump could do something reckless like refuse to leave the White House, Power says the overall feeling very bullish.

“It’s going to be a great run into the end of the year,” he predicts.

The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.