Setting the scene...macros/regulatory uncertainties are increasing
While it is good to see a bit of optimism creeping back into the market, with a broad rally to start the year, we believe there are increasing vulnerabilities to this type of sentiment-driven correction. These include:
- slowing growth in China and Europe;
- uncertainty around Brexit; and
- China/US trade talks (with a 1 March deadline for further tariffs).
Locally, a looming Royal Commission into Aged Care and a federal election increase investor angst.
Sector performance solid long term, some headwinds near term
While sector performance has lagged the broader market over the past six months (-5% vs -3.7%) and aforementioned local issues have dampened upside over the past month (+2.3% vs +7.5%), the Healthcare sector has outperformed the broader market in eight of the last ten years and core industry growth drivers (growing/greying population, continued innovation, increased expenditures as a percentage of GDP) remain intact.
We believe the perceived safe haven of healthcare should emerge, once again, as a top sector as stocks struggle for direction into the new year, with our preference for offshore earners ResMed (RMD), Sonic Healthcare (SHL) and Volpara Health Technologies (VHT).
Senior Morgans Analyst Scott Power and I discussed the Healthcare sector with the Morgans network ahead of reporting season (February 2019).
You can watch the presentation below:
Additional details regarding our reporting season hit and miss candidates are provided in the Reporting season preview research note (Morgans clients can login to view). Alternatively, please contact your Morgans adviser or nearest Morgans office for access.
Our Reporting Season calendar for February 2019 includes all the reporting dates and our company recommendations and comments.
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