FINSUM + Magnifi: Healthcare Will be a Headliner Even After the Pandemic
April 23, 2021
Healthcare has been one of the dominant stories of the pandemic, but its stock prices haven't matched the pace of the overall market. Healthcare stocks have lagged the S&P 500 earnings by 5% YTD. However, the biggest reason for this is the pandemic has shifted priorities and healthcare relies on the overall economy (making up about 18% of GDP) to pick up before it can fully bounce back. Additionally, the Biden Administration has yet to appoint a Food and Drug Commissioner which will be crucial in the upcoming years. However, valuations and earnings reports have been positive: UnitedHealth trades at 21x this year's forecast and Pfizer about 12x, well within normalcy. Healthcare will be in a good position as more speculative stocks settle down.
FINSUM + Magnifi: Pharma Still a Value Play Despite Being a Key Industry in the Pandemic
(March 2021)
Most pharmaceutical companies kicked it into high gear to develop the Covid-19 vaccine, but they received very little investor attention compared to the overall market. Price to earnings ratios are among the lowest of any industry group in the S&P 500. Many drug companies will see their future earnings increase as we exit the pandemic because many American’s have halted their prescription use for smaller ailments during Covid. Pfizer has seen some of the most extreme value of the pharmaceutical companies, and ‘booster’ shots could sustain covid earnings. Lilly, AbbVie, Bristol Meyers, and Merck all have a promising future pipeline that could generate profits for future investors.
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FINSUM + Magnifi: Why Healthcare ETFs are About to Win
(March 2021)
The multinational biopharmaceutical company Amgen has agreed to terms to acquire Five Prime Therapeutics Inc. Amgen aims to improve its portfolio of cancer drug treatment candidates. Among the drugs in part of the acquisition is the promising stomach cancer drug called bemarituzumab which will enter stage 3 testing. Amgen sees the drug as a major tool to leverage growth in the Asia-Pacific markets where stomach cancer is much more prevalent, the U.S. had only about 3% of stomach cancer cases compared to China last year. Five Prime’s stock soared on the news to match the premium offer put on existing shares by Amgen in the acquisition. Several ETFs hold high stakes in Amgen such as VanEck Vectors (BBH), IShares Nasdaq Biotechnology (IBB), and iShares Evolved U.S. Innovative Healthcare (IEIH). Amgen makes up anywhere from 4-7.8% of the holdings of these ETFs.
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FINSUM + Magnifi: This New Treatment Spells a Turnaround for Biotech Behemoth
(March 2021)
Vertex Pharmaceuticals was a shining star amongst the already bright biotech industry. In the nearly decade-long stretch between 2012 and 2020, it quadrupled the growth in the S&P 500. But as of late Vertex is slipping, down 25% since October since news broke about the halt of a new drug treatment. A drug intended to treat lung and liver disorder AATD was a bust, which caused the company that made its mark treating cystic fibrosis to slip. However, the fundamentals that allowed Vertex to climb in the 2010s are still present. Vertex continues to innovate in cystic fibrosis, with a new drug entering phase three of research, and Vertex has another play with AATD. It plans to enter the new drug into play for phase two of treatment in Q2. The company has considered acquisitions outside the company, but Vertex has assured investors of a robust development pipeline.
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FINSUM + Magnifi: Potential Trouble in the High Yield Market
(October 2020)
The high yield bond market is sending some very odd signals. Over the month of September, something highly unusual happened—the most poorly rated bonds outperformed higher-rated ones. The junk bond market as a whole posted a 1% loss in September, but the lowest rung—CCC+ and below—gained 0.4%. According to well-known strategist Marty Fridson, “The market’s message, namely, that risk decreased in the riskiest high-yield bonds while increasing in the least risky bonds, is perplexing … If a weakening of economic prospects caused default risk to increase, then surely the issues most susceptible to default were the most affected”. According to Fridson, what might be happening is that two separate investor groups have settled into the market: “Our notion is that some investors respond to an increase in credit risk by shedding speculative-grade bonds, while others wait for just such opportunities to put money to work … We suggest that the former group dominates the action in the medium-to-upper end of the speculative-grade quality range, while the more opportunistic players exert greater influence on the bottom tier’s behavior.”
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FINSUM + Magnifi: Healthcare - The Winners and Losers in the Election
(October 2020)
One of the sectors that will be impacted most acutely by the election is healthcare. A win by Trump or Biden has highly divergent outcomes for the industry. To analyze the impact, it is best to look at the space by sub-sectors. For instance, in a Trump victory, pharmaceutical companies and insurers would likely thrive with the continuation of the status quo. If Biden were to win, there would be a very different reaction. Pharma and insurers would likely struggle under Biden, but equipment manufacturers and biotech generally would see gains. For a Biden win, check out ETFs like the IBB Biotech ETF or the IHI Medical devices ETF. For a Trump win, consider the SPDR S&P pharmaceuticals ETF (XPH) or the Fidelity MSCI Health Care ETF (FHLC).
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FINSUM + Magnifi: Stocks May Drop Big on New Vaccine Shortage Announcement
(September 2020)
Ask yourself what is really keeping market and economic expectations aloft (besides the Fed). Very quickly most will realize that it is the expectation that a COVID vaccine will be available sometime before the middle of next year, which would ensure a smooth recovery by allowing everything to “get back to normal”. Therefore, disruptions to that assumption can be very damaging, which market volatility around vaccine news has already proved. Well, big news has just come out on that front: the largest producer of vaccines has just said there will not be enough vaccines for everyone until 2024. The CEO of the Serum Institute, the largest producer of vaccines in the world, said that the vaccine will most likely be two-dose, meaning that 15 BN doses would be needed to protect the whole world. “I know the world wants to be optimistic on it . . . [but] I have not heard of anyone coming even close to that [level] right now”.
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