By Mott Capital
Published on Jan 31, 2017
Let’s talk about healthcare stocks, huge issues and lots controversy and lot of interests, and changes coming into this sector. Do you have any guess what we may see?
I don’t think anybody has a clue. I don’t even know if the administration has any idea, regarding what we will see at this point. All we know is that something is going to change.
We do know that the Healthcare Stocks overall has not participated much in the rally. Do you think there’s room for it to go up or just depend on what we see?
Healthcare was one of the worst performing sectors in 2016, and you started seeing a little bit of a comeback in the Healthcare stocks to begin 2017. Then all of a sudden, Trump goes on TV and tells everyone that they’re getting away with murder and the sector gets killed and hasn’t recovered yet. I think everyone is just waiting to see, it’s the 800-pound gorilla in the room and is what are they going to do and how are they going to fix it. I think it comes through somehow adjusting the mechanism for competition and trying to speed up an FDA approval process maybe or maybe shortening the number if phases III trials that are needed. I just don’t see how else they do it.
It is going to be fascinating, there are a lot of ways they can attack it and how it will all come together and be effective and drive down health care costs, but keep the quality up. Biotech stocks has been another area. Biotech is up 6% but hasn’t been up as much as some other areas, what do you see in that space?
Biotech I think is going to continue to struggle with the rest of Healthcare until again we get this you know piece of news out of the way.
Any thoughts on M&A or buyout activity?
I think M&A is going to be huge because if you look at a lot of the large pharmaceutical companies like the Lilly’s, Pfizer’s, Merck’s they have no EPS growth, they are are in 5-10% range. I think Lilly is the biggest grower next year at 16%. Right now, they’re all trading at multiples in 15 to 25 range on forward earnings. For now, the markets is giving them the benefit of higher multiple, but the companies are not delivering on growth. Then when you think about corporate taxes coming down the road that’s not going to benefit them either because the majority of them do not pay any corporate tax at this point. So where is it going to come from, it comes from M&A. They’re going to have to go out, and I think you’re going to see a lot of them do M&A this year.
Wow, really interesting something to watch for.
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