sector analysis healthcare anurup upadhyay bus 416 investment management 3/5/14
TRANSCRIPT
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Sector Analysis
Healthcare
Anurup UpadhyayBUS 416 Investment Management
3/5/14
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What Does Healthcare Constitute?
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The Healthcare Industry
• A category of stocks relating to medical and healthcare goods or services
• Hospital management firms, HMOs, biotechnology and medical products’ providers
• Typically considered defensive stocks
• Typically less sensitive to business cycle fluctuations
- Investopedia.com
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More Specifically…Specialized Health
Services Health Care Plans
Medical Practitioners Drugs - GenericMedical Labs &Research
Drug Related Products
Instruments & Supplies
Manufacturers - Other
Appliances & Equipment
Manufacturers - Major
Long-Term Care Facilities Drug Delivery
HospitalsDiagnostic Substances
Home Health Care Biotechnology- Yahoo Finance
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S&P 500 Sector Breakdown
- S & P Dow Jones Indices
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SMIF Holdings in Healthcare
As of 2/16/14
Company % Holding Sub-SectorUnited Health Group
Inc. 3.01% Healthcare Plans
Stryker Corp. 3.42%Appliances &
Equip.
Pozen Inc. 1.62% Drug Manf. - Other
Pfizer Inc. 1.30% Drug Manf. - Major
Parexel Int’l Corp. 1.48% Labs & Research
Total 10.83%
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Leading Sub-Sectors
In Terms Of Leader Value
Sector Averag
e
Market Capitalization
Drug Manufacturers -
Major63,211.42
B5477.2
B
P/E Ratio Biotechnology 376.5 50.8
ROE Hospitals 153.40% 19.25%
Dividend YieldMedical
Practitioners 5.751 1.477
Net Profit Margin
Drug Manufacturers -
Major 17.50% 6.39%- Yahoo Finance, as of Feb. 25, 2014
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2014 Global Healthcare Sector Outlook
- Deloitte Touche Tohmatsu Limited
• Global health care spending as a percentage of Gross Domestic Product (GDP) to average 10.5%
• Annual average spending to increase by 5.3%
• Emerging markets: China, India, Indonesia, Russia, Mexico
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Top Issues and Trends
- Deloitte Touche Tohmatsu Limited
• Aging Population and Chronic Diseases
• Cost and Quality
• Access to Care
• Technology
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The Good News for 2014
- PricewaterhouseCoopers LLP
• Biotech and medical devices and equipment rank in top five for corporate venture capital investments• Biotech second @ $644.95
million• Medical devices & equipment
fourth @ 340.73 million
• Research and development an economic engine in consumers’ eyes• 69% agreed in 2013 while
61% agreed in 2011
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A Case For Biotechnology• Highest P/E in the industry; although
volatile/unpredictable
• New discoveries for disease treatment conducive to growth/gains in stockholder value
• Patented biotech drugs enjoy a 12-year period of protection from competitors, guaranteeing favorable long-term returns
• Hurdles: Short-term lossesFDA regulation
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I am recommending that we buy 57 shares of Amgen, Inc. for approximately $126.18 per share for an approximate total of $7192.26. This represents approximately 2.87% of the portfolio.
Why 2.87%? = S&P 500 Healthcare Weight – SMIF Healthcare Weight= 13.7% - 10.83%= 2.87%
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• Established in 1980; discovers, develops, manufactures and markets human therapeutics based on cellular and molecular biology advances
• Presence in more than 50 countries worldwide
• Specializes in treatment of cancer, kidney disease, rheumatoid arthritis, bone disease and other serious illnesses
• First-of-its-kind company to heavily research human therapeutics (eg. Immunotherapy)
- Amgen Official Website
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• Amgen-Betta Pharmaceuticals joint venture established in China
• Amgen Astellas BioPharma K.K. announces Japan alliance
• Amgen breaks ground on innovative manufacturing facility in Singapore
• Amgen acquires Onyx Pharmaceuticals
Amgen, Inc. Developments 2013-14
- Yahoo Finance, NY Times, Amgen Official Website
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Amgen vs. S&P 500
- MSN Money, 2014
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Overview & Comparison
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• Timeliness: 3; Safety: 1; Technical: 3
• Strong product portfolio to facilitate continued growth, stability
• Broadening customer base (Onyx)
• Numerous clinical trials ongoing
• A nice addition to just about any account
Value Line Highlights (Dec, 2013)
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• Thomson Reuters (Feb., 2014):
What Do Analysts Say?
Rec. Trends Feb. Jan. Dec. Nov.
Strong Buy 5 4 4 4
Buy 8 9 9 8
Hold 14 13 12 12
Underperform
0 0 0 0
Sell 0 1 1 1
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• Zack’s Rating (Feb. 28, 2014): • Neutral – Outperform ($148) • One of the five strong buy stocks
• Seeking Alpha (Feb., 2014)• Amgen to see significant sales growth between
now and 2017 and continued sales growth through 2023 due to growth from Onyx-acquired products
• Growth from Amgen's current pipeline products without even considering future pipeline products
• Important to select undervalued stocks and Amgen one of them
What Do Analysts Say?
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Questions