McKesson Corp (MCK)

In general, healthcare's come off a bit due to rotation into growthier areas. Remember that it's very important to be diversified, and to have defensive areas in your portfolio.

Pharmaceutical logistics. Recent rotation out of healthcare and into more exciting areas. He still sees 12-13% earnings growth, trading ~17x forward PE. A tad below 200-day MA, which is a bit concerning.

Largest distributor of pharmaceutical drugs in the US. Top 3 players have a combined 90% market share. Yesterday a competitor reported weak earnings, but that's not endemic to the industry. Serves needs, not wants. Secular advantage from demographics. Dividend's grown at a compound rate of 14% over last 5 years. Very high ROIC. 

Plan to spinoff medical/surgical unit provides a catalyst. Yield is 0.45%.

Incredibly stable, predictable. Largest distributor of pharmaceuticals in the world. Aging demographic tailwinds. GLP-1 drugs are a huge growth area. Undemanding multiple. Quality company. Yield is 0.40%.

It reports Wednesday. When they report, the stock usually flies.

Surgical supplies. It doesn't screen well. The top line is tied to US healthcare spending. The chart looks riskier than it actually is.

His favourite US healthcare name, doesn't actually make anything. Drug distributor, and has done a good job. Invests in drug development centres, so has a foot in the door in securing those distribution contracts.

Largest player in the space. Top 3 players command 90% market share. Distributor of generic and branded pharmaceuticals. A need, not a want. Secularly advantaged by demographic and morbidity trends in the US. Divested assets that dragged down profitability. Medical/surgical unit to be spun off, a catalyst that will surface hidden value. Yield is 0.40%.

Like them for being US-centric, fast growth and not being expensive. They got out of a European business last year, which removes foreign-exchange issues. Also, health care is finally starting to rise.

Likes the reliable earnings. Steady prescriptions, specialty therapy (increases margins). In oncology drug space, which also has good margins. Automation and AI are helping margins further. 10-12% earnings growth rate at a decent PE. Just under 70% of Americans take at least 1 prescription drug a day; 25% take 4 or more. Population aging and more complex conditions will support volume growth of prescription drugs. 

You don't find a chart better than this, long-term uptrend. Ascending channel of higher highs and higher lows. Yield is 0.39%.

Many attempts to lower drug prices in the US, and every one of them has failed. Very highly entrenched business to deconstruct. But stocks will rerate on the noise. So how much downside would there be to revenue? 

He wouldn't buy this here. Tariffs and the drug noise have provided opportunities to expand in the healthcare space, which is very undervalued right now.

Last Thursday, they reported an EPS beat and a big revenue miss. But the report was strongly enough to trigger a rally. Unfortunately, but then Trump announced he would slash drug prices (he needs Congress to approve). Don't dump it, but take profits.

Not expensive valuation at 18s PE. Has a strong earnings engine to support that.  Growth is coming from the weight loss drugs. Likes them.

A volume business. Competitive advantage is not huge. Has done a great job. Don't be in any rush to get rid of it. Slow and steady.