The Port We Need In This Market Storm

Editor’s Note: Our experts here at cover a lot of investing topics and great stocks every week. To help you make sense of it all, every Wednesday we’re going to pick one of those stocks and use Magnifi Personal to compare it with its peers or competitors. Here we go…

When markets turn as volatile and uncertain as they’ve been this week, it’s a good idea to look for sectors you’d want to be invested in no matter where the markets go.

Healthcare is one such sector.

It encompasses two contrasting types of businesses. The first is boring, large-cap stocks in the pharmaceutical and healthcare services sectors. These traditionally provide some defensive qualities if the economy starts to slow. That’s true because a lot of healthcare spending is not dependent on cycles in the economy. People get sick no matter the economy.

The more exciting part of the healthcare sector is very growth-oriented, with high valuation multiples. This is the biotechnology sector, with exciting fields like genomics, CRSPR gene-editing machines, and cures for cancer.

And even beyond biotech, there are also other growth segments in this healthcare sector, including medical data businesses and medical equipment suppliers. All of these are riding long-term trends such as aging and increased healthcare spending, along with big data and AI.

The safer pharma sector looks especially enticing for more conservative investors. Vincent Deluard, strategist at StoneX, has run numbers showing pharmaceuticals have maintained 15% to 20% margins over the past 40 years. He told the Financial Times: “They have almost no exposure to energy and basic material costs: their main expenses are research and development, marketing and lobbying… Inflation in drugs prices and medical services has been twice that of the broad consumer price index in the past 40 years.”

But for the adventurous among you, putting money into the more exciting biotech small caps may be the way to go. Valuations are cheap, with a substantial upside.

So, I asked Magnifi Personal to compare an ETF from each healthcare segment - pharma and biotech. I didn’t even have to find the right ETFs. Continue reading "The Port We Need In This Market Storm"