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Quarter-End Insights

Health Care: Some Healthy Bargains Still Remain

While the sector looks fairly valued overall, we still see several stocks that offer attractive valuations across the different industries, including pharmacy benefit managers.

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  • While the health-care sector is fairly valued in aggregate, some stocks still look undervalued, particularly in the pharmacy benefit manager (PBM) industry.
  • Mergers and acquisitions continue at a rapid pace, as large conglomerates are looking for growth avenues and opportunities to cut costs, especially through lowering taxes for U.S.-based companies.
  • Drug development in specialty-care areas, including virology and oncology, is increasing the productivity of drug and biotech companies, with several recent launches with very high prices reminding the investment community of the strong moats of large pharmaceutical and biotech firms.
  • Even though several years have passed since the worldwide economic downturn, overall health-care utilization remains tepid, but we see early signs of improvement partly spurred by health-care reform in the U.S.

 

Damien Conover does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.