Healthcare Is The Place To Be
This sector and its subcategories have been whipsawed by the perceived and professed policy preferences of the president-elect — and that trend has continued after Nov. 8.
"Concerns about drug pricing have been the clear negative catalyst, with President-elect Trump recently assuming the role of the people’s champion against unjustified drug price increases," the strategist writes. "But despite the ongoing political spotlight, which has resulted in biotechnology and pharmaceuticals being the two worst performing industries in 2016, fundamental positives remain." Healthcare has lagged all other S&P 500 sectors this year.
Within the industry, managed care is Glionna's preferred place to be, "followed by distributors, biotechnology, pharmaceuticals, life sciences, and equipment."
The ability to still generate "adequate" price increases and strong cash flow (which points to higher payouts) will buoy these companies in 2017, he says, and their poor performance this year means health care companies can be scooped up at a discount.
"The PE multiple of the sector is now more than one standard deviation below its 10 year average and the lowest of any sector by this measure," concludes the strategist.
This article was provided by Bloomberg News.