Buffett bets billions on healthcare sector

November 18, 2020

Published by Harvest ETFs
(Managed by Harvest Portfolios Group Inc.)

Warren Buffett took a deep dive into healthcare stocks this summer betting not just on a COVID-19 vaccine, but more broadly on the prospects for the sector.

According to filings with U.S. Securities Exchange Commission, in the third quarter of 2020, his Berkshire Hathaway Inc. spent billions to buy stakes in big pharmaceutical names. The purchase of stock in AbbVie Inc., Bristol-Myers Squibb Co., Merck & Co. and Pfizer Inc. were part of the $4.8 billion Berkshire spent buying stock during the period.

The four companies are also core holdings for the Harvest Portfolios Groups’ Harvest Healthcare Leaders Income ETF(HHL:TSX).  The ETF holds 20 of the largest global healthcare companies with broad sector representation. About 45% of its holdings are in pharmaceuticals, 15% in biotechnology, 20% in healthcare equipment and supplies and 15% in healthcare providers.

The disclosure of Berkshire’s Pfizer holding – 3.7 million shares valued at $133 million at current prices (Nov 17) – came a week after the drug maker announced that its Covid-19 vaccine has been more than 90% effective in preventing cases of the virus. It was followed by the news that Moderna Inc., another company in the vaccine race, says its formulation is 94.5% effective.

Buffett’s move is not just about vaccines, but the broader prospects for the pharma space. Those prospects were explored by Paul MacDonald, Chief Investment Officer at Harvest Portfolios Group, in a recent webinar for advisors.   

Mr. Paul MacDonald, CIO & Portfolio Manager at Harvest Portfolios Group Inc., said the financial and scientific resources committed by Big Pharma towards a COVID-19 cure have created a halo effect for all companies. Beyond that, the prospects for the sector are bright and offer value, he said.

Mr. MacDonald said a number of trends favour healthcare:

  • Aging populations in developed economies mean an older demographic is spending more on drugs and surgical procedures.
  • Emerging market maturity means more healthcare spending as a portion of GDP. China and India’s healthcare expenditures are growing at a 14% annually, almost triple that of the United States.
  • Technological innovation is leading to such things as robot-assisted surgeries, new medical devices and drugs.
  • Historically low valuations mean opportunity. Valuations have shrunk as the pandemic has reduced surgeries and other hospital procedures.
  • US election result: Even with a change at the White House healthcare reform will be at the margins because the American system is complex with vested interests that make it hard to change things.

Mr. MacDonald summarized his presentation, noting that: “Over the medium to long term, we’ve got permanent non-cyclical growth dynamics in the healthcare sector. In the shorter term the political landscape is creating opportunity and the valuations are attractive.”

For more on Harvest click here.

You may also like…

Disclaimer

You will usually pay brokerage fees to your dealer if you purchase or sell units of the Fund(s) on the TSX. If the units are purchased or sold on the TSX, investors may pay more than the current net asset value when buying units of the Fund(s) and may receive less than the current net asset value when selling them. There are ongoing fees and expenses associated with owning units of an investment fund. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated. An investment fund must prepare disclosure documents that contain key information about the fund. You can find more detailed information about the fund in these documents.

Certain statements in the Harvest Blog are forward looking Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or  “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS.

FLS are not guarantees of future performance and are by their nature based on numerous assumptions, which include, amongst other things, that (i) the Fund can attract and maintain investors and have sufficient capital under management to effect their investment strategies, (ii) the investment strategies will produce the results intended by the portfolio managers, and (iii) the markets will react and perform in a manner consistent with the investment strategies. Although the FLS contained herein are based upon what the portfolio manager believe to be reasonable assumptions, the portfolio manager cannot assure that actual results will be consistent with these FLS.

Unless required by applicable law, Harvest Portfolios Group Inc. does not undertake, and specifically disclaim, any intention or obligation to update or revise any FLS, whether as a result of new information, future events or otherwise.

Subscribe to our newsletter and stay informed

Join Us & Stay Informed!

* indicates required

Your Preferences   (Please select all the ways you would like to hear from)


You are a *


Confirm *