CIO & PM Paul MacDonald – BNN Bloomberg Video Replay

May 6, 2019

MARKET OUTLOOK

The healthcare sector is a direct beneficiary of one of the only secular, non-cyclical and permanent investment themes: the global aging population. Moreover, as wealth increases in developing economies, there’s a disproportionate increase in the amount of spending on healthcare; this will likely result in significantly increased demand for healthcare products and services over time. Finally, technological innovations coupled with regulatory advancements pave the way for catalysts across healthcare subsectors.

Political discussions on how to deal with the rising healthcare costs over recent years have caused sector volatility to increase and valuation multiples to contract. Healthcare is expected to be a key topic during the 2020 U.S. presidential election. Healthcare policy posturing by some Democrats running for the leadership of the party is seen to be extreme and raise concerns and even panic that the healthcare companies would be victimized under certain policy proposals. We view the proposals such as those from Bernie Sanders as political posturing and a way to capture headlines, being highly unlikely to impact the companies operating in the sector. Political posturing happened earlier than most had anticipated in the election cycle and we view the correction as an opportunity, with the fundamentals for the underlying businesses remaining intact and valuation multiples in many cases compressing to levels not seen in over a decade. We continue to advocate diversity across the sub-sector to minimize individual binary risks.

The underlying outlook remains robust with numerous short- and medium-term stock-specific catalysts coupled with expectations of improving top- and bottom-line financial performance.

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