The healthcare sector has outperformed the broad equity market during the coronavirus crisis as investors reward companies with advanced research to address COVID-19 and could continue to invest in biotechnology firms after the pandemic ends, Janus Henderson’s portfolio manager Andy Acker said.
Although healthcare stocks tended to act more defensively during an economic contraction, in these circumstances, there was not a steady stream of surgeries or doctor’s visits that were expected to help prop up healthcare companies. On top of that social distancing and preparations for a surge of coronavirus patients sidelined many of these routine activities, he said.
However, investors continued to reward those companies which were using innovation to aggressively develop vaccines or treatments for COVID-19, while firms helping to facilitate remote medical care were also gaining favour.
“Investor focus on these trends has accelerated due to the crisis but could last long after the pandemic ends, in our view,” Acker stressed.
“Although we are sceptical of the rally in certain biotechnology companies making headlines as it relates to the virus, we believe investor focus on the sector’s advanced technology could last long after the pandemic ends.”
At the same time, investors acknowledged that tele-medicine services were taking off as both Government and insurers encouraged the technology’s use as an efficient and safe means to treat influenza and potential COVID-19 infections, easing the burden on the healthcare system.
Although the advances were encouraging, Acker warned that investors should keep perspective and stressed it was very likely that we would not have a vaccine for the general population for at least 12 to 18 months.
“We think investors should expect continued volatility in the coming months. However, we believe the rapid pullback of equity prices has created some compelling opportunities,” he said.
“Longer term, we feel that the sector’s unprecedented innovation addressing unmet medical needs will lead to attractive growth – a point we think is now being driven home by the global race for a coronavirus cure.”
