One of the leaders of Citi Private Bank David Beilin advised to pay attention to the healthcare sector, and also highlighted promising industries and companies within the sector.
Health care is underestimated
One of the defensive and recession-resistant sectors is healthcare. Income of companies from this area does not fall even during economic crises. Citi strategists celebrate, that during market corrections, health care falls less compared to other sectors.
According to Bailin, now healthcare attracts not only with its protective properties, but also a fair assessment. The sector grew twice as fast as the broad market last year: 24 against 46% S&P 500. Today forward ratio P / E sector of 8% more than its average 20 years of value. In S&P 500 is more than 34%.
Of the possible risks, the investment bank highlights the regulation of drug prices and the revision of the insurance system in the United States. "But we think, that the chances of major health regulations being passed, which will reduce the revenue of companies, below, than the market lays down ", Bailin said.
Forward P / E sectors and S&P 500
| Current value | Average value for 20 years | |
|---|---|---|
| S&P 500 | 21,2 | 15,8 |
| Information Technologies | 24,3 | 18,8 |
| healthcare | 16,7 | 15,5 |
| Goods of second necessity | 32,9 | 18,7 |
| Communication services | 21,7 | 19,2 |
| Finance | 14,5 | 12,4 |
| Industry | 25,5 | 16,1 |
| Essential goods | 21,0 | 17,0 |
| Utilities | 19,4 | 14,6 |
| Raw materials | 19,8 | 14,7 |
| The property | 22,1 | 15,9 |
| Oil & Gas | 18,9 | 13,8 |
S&P 500
Current value
21,2
Average value for 20 years
15,8
Information Technologies
Current value
24,3
Average value for 20 years
18,8
healthcare
Current value
16,7
Average value for 20 years
15,5
Goods of second necessity
Current value
32,9
Average value for 20 years
18,7
Communication services
Current value
21,7
Average value for 20 years
19,2
Finance
Current value
14,5
Average value for 20 years
12,4
Industry
Current value
25,5
Average value for 20 years
16,1
Essential goods
Current value
21
Average value for 20 years
17
Utilities
Current value
19,4
Average value for 20 years
14,6
Raw materials
Current value
19,8
Average value for 20 years
14,7
The property
Current value
22,1
Average value for 20 years
15,9
Oil & Gas
Current value
18,9
Average value for 20 years
13,8
Specific directions and companies
The main "long-term arguments" for investing in health care, according to Citi, are global trends: population aging, income growth in developing countries, vaccine innovation, gene therapy, medical devices, telemedicine and many more.
Of the companies, the bank notes the manufacturer of medical devices for diabetics Dexcom (NASDAQ: DXCM), manufacturer of robotic surgical systems Intuitive Surgical (NASDAQ: ISRG), as well as pharmaceutical companies Abbvie (NYSE: ABBV) и Merck (NYSE: MRK).
Cost indicators of companies
| P / E | P / S | Forward P / E | From the annual maximum | |
|---|---|---|---|---|
| Dexcom | 64 | 16 | 100 | −27% |
| Intuitive Surgical | 86 | 21 | 53 | −7% |
| Abbvie | 43 | 4 | 8 | −1% |
| Merck | 28 | 4 | 11 | −11% |
P / E
Dexcom
64
Intuitive Surgical
86
Abbvie
43
Merck
28
P / S
Dexcom
16
Intuitive Surgical
21
Abbvie
4
Merck
4
Forward P/E
Dexcom
100
Intuitive Surgical
53
Abbvie
8
Merck
11
From the annual maximum
Dexcom
−27%
Intuitive Surgical
−7%
Abbvie
−1%
Merck
−11%
Financial performance of companies
| Dividend yield | Operating margin | Average sales growth for 5 years | |
|---|---|---|---|
| Dexcom | — | 15% | 37% |
| Intuitive Surgical | — | 26% | 13% |
| Abbvie | 4,5% | 25% | 15% |
| Merck | 3,3% | 15% | 4% |
Dividend yield
Dexcom
—
Intuitive Surgical
—
Abbvie
4,5%
Merck
3,30%
Operating margin
Dexcom
15%
Intuitive Surgical
26%
Abbvie
25%
Merck
15%
Average sales growth over 5 years
Dexcom
37%
Intuitive Surgical
13%
Abbvie
15%
Merck
4%
