Wall Street On Healthcare: 5 Takeaways From NHCC Investor Panel


Wall Street on Healthcare: 5 Takeaways from NHCC Investor Panel

The state of healthcare is great – if you’re an investor.

Four panelists forecast 2019 healthcare industry prospects at the Nashville Health Care Council’s annual Wall Street event. Speakers told moderator Joey Jacobs and 600 attendees that if you know where to look, healthcare is rife with investment opportunities.

Analysts on the panel explained why they’re not sweating Medicare for All, how healthcare will keep outperforming the stock market and why they’re especially bullish on managed care:

Healthcare is protected from macro-economic trends affecting other industries.

Investors watching the market monitor a handful of trends, said A.J. Rice, managing director at Credit Suisse, who listed China, trade tariffs and interest rates as examples. But most healthcare companies have little to no exposure there, he said, adding that managed care companies could benefit from rising interest rates. “I think we’re fundamentally set up pretty well,” Rice continued, adding that there’s still some volatility around exchanges established after the Affordable Care Act passed, but those impact a small percentage of the healthcare market.

Despite turmoil, healthcare has a long history of strong performance.

“If you look at the last eight years, healthcare has outperformed S&P,” said John Ransom, director of healthcare research at Raymond James & Associates. He said that should continue in 2019. “Our thesis is healthcare earnings are going to hold up better than the market.”

Investors are bullish on managed care companies.

When asked about top stock picks for 2019, Leerink Managing Director of Health Care Services Ana Gupte ticked of a handful of companies from one sector: managed care. “I see reasons to buy them all,” she said, referencing what she calls the “Big Five” managed care companies: CVS, Cigna, Anthem, Humana and United. “The fundamentals across the board are great,” she said.

Wall Street isn’t worried about Medicare for All.

“Having read the four bills out there on Medicare for All, they aren’t that bad,” said Piper Jaffray Principal and Senior Research Analyst Sarah James, who added that she’s skeptical any will pass. “I’m encouraged by the fact that people have already started to walk back the language on these bills,” she said. And even if they do reach the floor, which she deemed unlikely, “what will come to a vote will be extremely mild.”

Investors are looking to the private sector for new ideas.

“Looking at public companies, we’re not going to see the same level of innovation in primary care that we do in the private sector,” said Raymond James’ Ransom. In fact, he said, “I’m a tad frustrated with the relatively slow pace of innovation in public companies.”

Jarrard Inc.
ourthinking@jarrardinc.com