Paul MacDonald

Healthcare amid volatility. Challenging environment, to say the least. Macro uncertainty, inflation running hot, interest rate uncertainty. Relatively, healthcare is holding up quite well given the volatility we're seeing. But not all healthcare. Some areas, like smaller cap and higher growth, are more impacted.

Grey tsunami fueling bullish outlook? Absolutely. Healthcare is one of the very few areas of the market that's well positioned for the aging population dynamic. As people age, they spend exponentially more on their healthcare needs. There are non-cyclical drivers as well, like developing markets and technological innovation in medical devices, pharma, bio, and bio tech. The macro environment is very strong. Visibility across many sub-sectors is challenged with rising interest rates. Healthcare is known as a superior good, and so it has pricing power. We need it in up and down markets. Healthcare is where investors should be. Canada has few offerings. You should be looking for at least a market weight toward the sector, which is 13-15% globally.

Criteria for healthcare stocks. Dominant companies, proven ability to execute over economic cycles. Large cap with diversified product lineups. As you're reviewing and rebalancing your portfolio, you really want to be in quality companies. Robust financial metrics, reliability of earnings across economic cycles.

Too small for him, challenging environment. Management seems solid. Invests in biotech and pharma companies in exchange for a royalty. Drugs are coming off patent, so revenues will decline. Check out the payout ratio. He tracks RPRX in the US, which is 100x bigger with 25B market cap.

Invests in biotech and pharma companies in exchange for a royalty. He tracks this one, with its 25B market cap.

Once they spun out their biosimilar business, he sold. Saw lots of debt, drugs coming off patent and pricing pressure, not a lot of growth. Value trap, even at these levels.

NVO vs. LLY Focused on weight loss and diabetes. One issue is the liquidity, as it doesn't work well for his covered call strategy. Still fairly expensive. LLY had great weight reduction results recently. LLY is at a discounted valuation, a more diversified business, and exposure to Alzheimer's. He prefers LLY, but you'd be OK on both.

LLY vs. NVO NVO is focused on weight loss and diabetes. One issue is the liquidity, as it doesn't work well for his covered call strategy. Still fairly expensive. LLY had great weight reduction results recently. LLY is at a discounted valuation, a more diversified business, and exposure to Alzheimer's. He prefers LLY, but you'd be OK on both.

Chart has come full circle. Covid vaccine was a tremendous short-term win for the company and society. Revenues are trailing off for the next 2 years. Avoid the rockets and torpedoes. Look at PFE instead.

Diversified business, gold standard. PFE is making acquisitions, building out the pipeline from Covid cashflow wins. Good mRNA franchise, benefits of diversity, plus management team executing on pipeline of acquisitions.

Boost to brand recognition from Covid? Early on, yes. More so for Moderna, which went parabolic. Not so much for PFE. If PFE can build out its pipeline, we should see the stock get re-rated.

(A Top Pick Oct 20/20, Up 52%) Great business. Dominant player in managed care. GARP. Executing exceptionally well, consistent.

(A Top Pick Oct 20/20, Up 30%) Quality company. Concerns have abated. Catalyst coming up with cardio drug in the second half of the year. Not very expensive.

(A Top Pick Oct 20/20, Up 90%) Largest biotech company. Concerns about Humira coming off patent were overblown. Likes its R&D, as well as its M&A strategy. Missed on one trial, another one coming up. Good balance sheet, pretty good dividend, consistent cashflow. Good entry point.

Large, diversified. Specific lab and diagnostic equipment. Covid demand may have caused stock to gap up. Not immune to market rotation away from growth. Likes leadership, executing well. Multiple has compressed. Comfortable holding.