Check Up: Money managers are still bullish on Healthcare; here’s what they said
Health & Biotech
Health & Biotech
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Dr Anthony Faucci, America’s top infectious disease doctor, told the World Economic Forum that there are five stages of the pandemic.
The five stages, in this exact order are: acceleration, deceleration, control, elimination, and finally eradication.
Speaking in January at the height of the Omicron wave, Dr Faucci said the world was still stuck in the first stage, where “the whole world is really very negatively impacted as we are right now.”
But since then, progress has been made and most experts believe that we have now reached the Control stage.
This is the phase of the pandemic that’s often referred to as endemicity, meaning that COVID-19 would become integrated into the broad range of infectious diseases we commonly experience, like the flu or the common cold.
For investors, regardless of where we’re at, the gradual easing of the pandemic has resulted in the dumping of health and biotech stocks globally.
In the US, the benchmark Healthcare Index (INDEXNASDAQ: IXHC) is down 22% this year. On the ASX, the S&P/ASX 200 Health Care [XHJ] is also down 11%.
But now global fund managers are warning against giving up on the sector too soon, especially as we enter into a high inflation cycle.
Here’s a quick compilation of what the global asset managers are saying about the healthcare/biotech sector:
“With the outlook for healthcare innovation unchanged, waning enthusiasm for those stocks have driven sector valuations to the cheapest in years, cheaper than defensive peers and growth peers,” said JP’s analyst Dubravko Lakos-Bujas.
“While rising energy and inflation costs could be a concern for crowding out healthcare spending in the short term, demographic trends, excess savings, and rising wages all suggest otherwise.
“Based on consensus estimates, healthcare is expected to generate healthy mid-single-digit revenue growth this year and next.”
“The healthcare sector is an important growth opportunity,” wrote Citi’s Chuck Adams in an investors’ memo.
“We at Citi are committed to continuing to invest in the healthcare business, and attracting and retaining best in class talent is a top priority of our global health-care, consumer and wellness franchise.”
“We downgraded consumer discretionary, financials and industrials from most preferred to neutral,” said a note from UBS.
“To accommodate these changes, we upgraded healthcare from neutral to most preferred, and utilities from least preferred to neutral. That leaves us with most preferred views on energy and healthcare, offset by a least preferred view on consumer staples.”
The bank admitted they are at “a loss for new ideas” this week, but recommended investors to stick with pharmaceutical and biotech companies due to their “defensive attributes” in this market.
Great Hill Capital:
“With Big Pharma losing their patents on many blockbuster drugs, but having tons of cash on their balance sheets, they will be forced to aggressively buy innovation in the biotech sector to maintain and accelerate growth,” Thomas Hayes, chairman of Great Hill Capital in New York, told The Street.
According to data from FactSet, FTSE Russell and Jefferies, the current combined cash balance of Russell 3000 Health Care companies has exceeded $500 billion, an increase of 400% in the past 20 years.
Dakota Wealth Management:
“As far as healthcare is concerned, it is a prime candidate for an inflationary environment,” senior portfolio manager, Rober Pavlik, told Yahoo Finance Live.
“And so I do believe that there are some opportunities in healthcare. Again, there are some very pricey stocks within the group. But I think you could look to the blue chip companies, and probably do quite well in a very choppy trading environment.”
Cryosite Limited (ASX:CTE) was the biggest mover this week. The clinical trials logistical company hasn’t released any news in a month, but back in March it did announce a change in chairmanship and buying of shares from its directors.
Aroa Biosurgery (ASX:ARX), a soft tissue regeneration company, reported a FY22 full year product revenue of NZ$37.7 million on a constant currency basis. This represents a growth of approximately 84% on FY21, and exceeds the company’s guidance of NZ$34-37 million.
Holista Colltech (ASX:HCT) has received its first commercial order from Country Farms for its innovative food ingredients to be used by Starbucks Malaysia, and sold into Country Farm’s modern trade channels in Malaysia. The initial order was worth $43k AUD for Holista’s low glycaemic index (GI) food ingredient GI Lite, and its sugar reduction substitute, 80Less.
Immuron’s (ASX:IMC) sales of Travelan in North America were up by 185%, and worldwide gross sales grew by 216% YoY in the third quarter of FY22, reaching $193k. Travelan is an orally administered passive immunotherapy that reduces the likelihood of contracting travelers’ diarrhea.
MedLab Clinical (ASX:MDC) announced a northern hemisphere trade deal with the former contract manufacturer of NRGBiotic. The three-year trade deal with UK-based Cultech Limited will see CulTech market NRGBiotic to UK pharmacies and health food stores