Healthcare leaders see emerging market payoff

November 29, 2019

As emerging markets in Asia and Latin America mature, one investment opportunity is in healthcare services.

The areas of growth include preventative and public health, expanding health insurance in the workplace and a broader supply of surgical procedures.

A good example of how that is working its way back to the sales and profits of multinationals is Boston Scientific Corp., Abbott Laboratories and AbbVie Inc., top holdings of the Harvest Healthcare Leaders Income ETF (HHL-TSX, HHL.U-TSX).  

Boston Scientific makes medical devices that are used to diagnose or treat conditions that include heart disease, digestive, pulmonary, vascular, urological, women’s health and chronic pain. The company was founded in 1979, has 32,000 employees and sales of $10.4 billion in it’s latest 12 months. Boston Scientific has a market capitalization of US$60 billion

Growth in emerging markets helped the company to a strong quarter, with a nearly 20% increase in revenues from China and Latin America. This includes its Watchman device, which is designed to prevent blood clots that form in the heart from reaching the brain. It also benefitted from strong performance of its other products related to heart disease in the broader Asia-Pacific region.

Abbott  Labs was founded by Chicago doctor Wallace Abbott in 1888 to make drugs. Today it sells medical devices, diagnostic tools for diabetics and over-the-counter medicines such as infant formulas Similac and Pedialyte and Ensure, the adult nutritional supplement. It split off its research-based pharmaceuticals into AbbVie in 2013. Abbott has a market cap of US$148 billion and annual revenues of $31.3 billion on a trailing 12-months basis.

In reporting its latest financial results Abbott noted that emerging markets including India, Brazil, Russia and China, along with several other emerging countries represent the most attractive long-term growth opportunities for Abbott’s branded generics products.

Sales in these geographies increased 2.8 percent on a reported basis in the third quarter and increased 6.8 percent on an organic basis, which excludes an unfavorable foreign exchange effect. Organic sales growth was led by strong growth in India, China and Brazil.

As of Oct. 31, 2019, the Harvest Healthcare Leaders Income ETF held 20 of the largest global healthcare companies with an average market capitalization of $169 billion CAD.

About 44 per cent of the ETF’s portfolio holdings are in pharmaceuticals, 19 per cent in biotechnology, 19% in healthcare equipment and supplies and 15 per cent are healthcare providers.

The ETF’s portfolio holdings have an average dividend yield of 1.97% and a current distribution yield of 9.15% enhanced by Harvest’s covered call strategy. The ETF’s portfolio has a 5-year return on equity of 18.92%.

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The views and/or opinions expressed in the blog are of a general nature and are for informational purposes only. Blog contents should not be considered as advice and/or a recommendation to purchase or sell the mentioned securities or used to engage in personal investment strategies. Investors should consult their investment advisor before making any investment decision.

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