Remember, remember, the 5th of November
The main event of the month was the American election and the many waves it generated across countries and sectors. In the healthcare sector, the nomination of RFK as head of the HHS was widely negatively received, as discussed below. However, following a very strong earnings season for the sector and positive commentary for the year ahead at recent conferences, we see an attractive setup for healthcare in 2025.
Overall, we see the healthcare sector as attractively valued and see room to create value through active management in a volatile market.
What the RFK?
The appointment of Robert Kennedy, aka RFK, as Secretary of the US Department of Health by Trump has weighed on the sector over the past few weeks. This unexpected nomination contrasts with the relative calm with regards to healthcare prior to the election, as the sector had largely remained out of the campaign rhetoric.
RFK has long been a vocal opponent of the FDA, childhood vaccination, and the pharmaceutical and agricultural industries in general. One of the focal points of RFK’s political discourse has been tackling chronic diseases, notably as relates to modern lifestyles.
In particular, RFK has singled out the food and agriculture industry as being responsible for these diseases via their products.
In addition, per media reports RFK’s team is working closely with the Trump team to select heads of key departments such as the FDA (Food and Drug Administration), NIH (National Institutes of Health), CDC (Centers for Disease Control) and CMS (Centers for Medicare and Medicaid Services).
However, both RFK and the heads of key departments need to be confirmed by the Senate. While held by a Republican majority, these confirmations will likely require some level of comprise by the nominees.
Overall, there are still many unknowns, starting with what RFK’s priorities will be for the agency. While the news of his nomination was received very negatively by the sector, we believe impact of future earnings will be modest.
Finally, we view such market dislocations as opportunities to bring value through active management.
A strong setup for Healthcare in 2025
Despite the year-to-date underperformance and intense headline pressure on the sector in the past few weeks, we look into the coming new year with optimism. The sector’s fundamental earning profile is strong with annualized earnings expected to grow on aggregate 6% faster than the market in the mid-teens.
Despite this, sector valuations are at a discount following two years of underperformance and the recent headline volatility. Finally, structural drivers of increasing disease burden and healthcare costs globally are unchanged.
We therefore see an attractive setup for the sector in 2025.
Top 5 this month:
- Pro Medicus 28% Momentum, large contract
- McKesson 26% Earnings beat and raise
- Waters Corp 19% Earnings beat, biz. rebound
- DaVita 19% Positive commentary on 25
- Insulet 15% Earnings beat
Source: Bloomberg Finance L.P., Kieger
Bottom 5 this month:
Bayer -24% Earnings, miss and lower
Moderna -21% Earnings, RFK
Grifols -18% M&A offer retracted
Amgen -12% Obesity trial data
Astellas -12% Drug not approved by FDA
This news article has been issued through Kieger AG and is for distribution only under such circumstances as may be permitted by applicable law. This document is for information purposes only and does not constitute an offer. Past performance is not a reliable indicator of future results. The details and opinions contained in this document are provided by Kieger without any guarantee or warranty and are for the recipient’s personal use only. All information and opinions contained in this document are subject to change without notice. This document may contain statements that constitute “forward looking statements”. A number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. Data source: Statestreet / Factset.
