The health sector has always been a focus of attention, but this attention has intensified significantly recently, at a time when search for a vaccine for Covid-19 It has become a priority objective.
As we head towards a recession Possibly of dimensions and characteristics never seen before in our lives, it is possible that, when we reach the end of this recessionary period, the healthcare sector will be the one with the greatest strength on the upside in the stock markets.
Over the past decade, the MSCI World Health Care Index returned 13% annualized, while the MSCI World gained 8%. And there are many reasons that can lead us to think that this superior behavior can continue. Among them, that the sector tends to have a reduced sensitivity to the economy, since there is always demand for new medical products and services.
Health as a megatrend
Furthermore, the sector already had advantages before the start of the pandemic that indicated long-term structural growth. The aging population and the rise of the middle class in emerging markets pointed to an exponential increase in demand for both drug treatments and medical supplies.
In investment funds, the VDOS Health sector category is one of the most profitable so far this year, with a revaluation of 1.7%. From this group of funds, the highest rated, five and four stars of VDOS have been selected, with a minimum contribution of up to 6,000 euros, more suitable for the individual investor.
The most profitable of this selection is class A in euros of AB Sicav I-International Health Care Portfolio of the American manager AllianceBernstein Investments, which in the year obtained a yield of 3.9%. In the last annual period, it increased by 18.8%, with a controlled volatility figure for this concept of 16%, which places it in the second best group in its category for this concept, in quintile four. Invests primarily in healthcare companies around the world, with stock selection based on rigorous fundamental analysis to help identify those with the greatest long-term growth potential, in different market conditions.
To do this, the management team focuses on those companies with a history of high returns on invested capital, strong cash flows and attractive valuations, either because they offer new treatments or therapies, or because they have the opportunity to reduce costs for their clients. . Among the largest positions in its portfolio we find names such as Roche (9.57%), United Health Group (8.39%), Pfizer (6.58%), Vertex Pharmaceuticals (5.83%) and Zoetis (4%). A minimum initial contribution of 2,000 euros is required to subscribe to class A in euros of this fund, which applies a commission of 1.8%.
Class Y of accumulation in euros of Fidelity Funds – Global Healt Care manages to stay on positive ground throughout the year, with 0.5% appreciation. At one year, it obtained a return of 18.6%, with a cost for volatility in this last period of 16.8%, in quintile four also with respect to the rest of the funds in its category. Invest in high-quality companies that can achieve increased performance over time. Specifically, it seeks three characteristics: quality, visibility and sustainability, identified businesses with high and sustainable returns on invested capital, as well as those that can materially improve their returns.
The manager understands that, within the healthcare sector, there are multiple opportunities to buy companies with structural growth, supported by innovation. A minimum contribution of $ 2,500 (approximately 2,278 euros) is required to subscribe the fund’s Y class of accumulation in euros, which taxes its participants with a fixed commission of 0.8% and a deposit of 0.35%.
From the Swiss fund manager Bellevue, the Bellevue Funds (Lux) – BB Adamant Medtech & Services fund earns 14.5% over a year in its euro class B, with a volatility figure of 19%. Since the beginning of the year, however, it has not managed to place itself on positive ground (-1.12%). Invest globally in companies in the health and medical technology sector, seeking to offer its investors an attractive solution in the entire universe of the sector, with the exception of pharmaceutical companies.
It includes in its portfolio companies of any size of capitalization, basing its selection on fundamental analysis with the focus placed on medical benefits and possible savings for the healthcare system, as well as on the expected potential of its products and services. Its largest positions include shares of United health (17.60%), Abbott Laboratories (0.1%), Cigna (6.2%), Medtronic (5.9%) and Edwards Lifesciences (5.8%). It applies to its participants a fixed commission of 1.6% and a deposit of 0.4%.
Evolution of investment funds specialized in health.
Short-term sentiment in the health sector is estimated to be optimistic, especially in more defensive areas such as large-cap pharmaceutical and biotech, which generally have strong balance sheets and cash flows and, in some cases, good dividend yields.
The subsectors in which sentiment collapsed in March was that of medical devices and sanitary facilities, due to the delays in non-urgent procedures in hospitals. Small and medium capitalization companies did not perform very well either, as they were perceived as being more risky due to their size.
With a more long-term view, between one to three years, the subsectors that are perceived as the worst performing offer higher returns. Assuming that it returns to a situation of certain normality in that period, the sanitary facilities and small and mid-cap stocks in subsectors such as biotechnology, they are perceived as very attractive.
*** Paula Mercado is VDOS director of analysis