Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
The health care sector offer stocks with strong balance sheets and reliable revenue growth driven in part by demographics.
Citi analyst Ralph Giacobbe believes his sector has fallen too much and offers investors strong opportunities for gain.
In Tuesday’s “Oversold and Underappreciated – Assessing Impact of COVID-19 Across Healthcare," Mr. Giacobbe wrote,
“We would highlight Pharma, Biotech, Managed Care, and Retail Pharmacies as the most attractive healthcare sectors at this time… we consider MedTech, Tools, Hospitals, and Labs as sectors that likely face earnings headwinds in 2Q and 3Q … we see the healthcare sector as an area that can help lead that rebound for a group that is largely trading at attractive and discounted valuation… we provide a selection of stocks across healthcare that we believe exhibit some combination of bellwether or strong market position with fundamental stability, healthy cash flow dynamics, in many cases a dividend, lower leverage profile, more limited direct COVID-19 risks, and balances both near-term risks and intermediate-to-longer term recovery.”
The stocks highlighted are Abbott Laboratories, Danaher Corp., Portola Pharmaceuticals Inc., AstraZeneca PLC, DexCom Inc., Roche Holding AG, Bio-rad Laboratories Inc., Ionis Pharmaceuticals Inc., UnitedHealth Group Inc., CVS Health Corp. and Neurocrine Biosciences Inc.
“ @SBarlow_ROB Citi finds these health care stocks 'Oversold and Underappreciated" – (research excerpt) Twitter
Financial Times columnist Peter Chatwell is concerned about an “illiquidity doom loop” centered on bond ETFs,
“At one point last week, [iShares core euro corporate bond- IEAC] was trading at a whopping 6 per cent discount to the value of its underlying assets — known as the net asset value, or NAV. If you were a holder trying to sell the ETF back then, you may not have been aware that you were also crystallising this discount to NAV on the ETF when selling. ETFs such as this may have low management costs, on the face of it, but the end investor also pays for the liquidity mismatch when buying or selling … such funds may get further detached from the assets they are designed to imitate … I call it a liquidity doom loop. And it occurs because bond markets have finite liquidity (as bond traders have to hold capital against their trading books), while ETFs do not (there is no capital charge for ETF traders). Thus, when bonds are suffering illiquidity, as they are in the current crisis, ETF selling can make the bond market illiquidity worse.”
“SBarlow_ROB FT is concerned about an ETF-centered 'liquidity doom loop'” – (excerpt, link to full paywalled story) Twitter
Also from Citi, strategist Hong Li screened U.S. stocks for defensively-positioned companies with the highest amount of cash on the balance sheet relative to debt.
I focused on the picks in health care – Regeneron Pharmacuetical , Intuitive Surgical Inc., and DexCom are featured – and the information technology list which includes F5 Networks Inc., Paypal Holdings Inc., Arista Networks inc. and Verisign Inc.
C: U.S. stocks with the most cash on BS relative to ST debt pic.twitter.com/pGjejg8if0— Scott Barlow (@SBarlow_ROB) March 25, 2020
Diversion: “That Discomfort You’re Feeling Is Grief” – Harvard Business Review
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