Health Care Strikes Back

After five years of disappointment, healthcare is striking back as a market leader. Improving fundamentals, easing policy uncertainty, attractive valuations, and broadening technical strength suggest a durable shift back toward innovation, growth, and defensive quality.

---

Five years it took.

Our favorite sector is making a comeback: healthcare.

It is one of the four good industries to own - alongside technology, industrials, and consumer staples. These are the sectors where you find businesses you can hold for decades, not quarters. Businesses shaped by structural growth, delivering high and stable long-term revenue and earnings growth, earning strong returns on invested capital, and exercising genuine pricing power.

Just as important, many of these companies operate behind formidable economic moats. Oligopolies. Duopolies. Occasionally even monopolies. This is the kind of hunting ground we like to roam.

Health care, in particular, enjoyed a rosy moment prior to the boom – and bust – of Covid. But strip that episode away, and the last five years have largely fallen short of expectations. There was little to celebrate, save for one standout story: the breakthrough weight loss drugs from Eli Lilly and Novo Nordisk.

Today, that is changing. The outlook is improving – both fundamentally and technically.

Healthcare is striking back.

Let’s dig in.

Read more

Chart 1: Health Care relative performance to the S&P 500 over the last 30 years