Stocks are facing serious headwinds: inflation, a hawkish Federal Reserve, the war in Ukraine, and Chinese growth worries. And it’s resulted in an epic sell-off. The broader markets entered 2022 on a high note with most of Wall Street looking for another year of solid gains.
But that hasn’t happened. The outlook for the broader stock market remains bearish. U.S inflation is at a 40-year high and Canadian inflation is running at its quickest pace in 31 years.1,2
Fears of a recession are sending investors to safe haven investments with a history of providing stable revenue growth and reliable earnings. One sector that investors are turning to amidst the global volatility is healthcare.
As of this writing, the S&P 500 Health Care Index is up 16% year-over-year while the Health Care Select Sector SPDR Fund is up 7.5% over the last 12-months. Over the same time frame the S&P 500 is down one percent, the Dow Jones Industrial Average has fallen 3.6%, and the Nasdaq is off 9.5%.
Even during recessionary periods healthcare stocks tend to provide more stable earnings and outpace the broader stock market. Analysts at JPMorgan Chase & Co have noted that healthcare stocks provide “defensive growth, high margins and pricing power, and attractive shareholder yield at a reasonable valuation.”3
Growth Prospects for Leading Healthcare Companies
Pfizer, Acquiring ReViral
Pfizer Inc. recently announced it was acquiring ReViral Ltd for up to $525 million. ReViral, a privately held drug maker, is developing medicines for a life-threatening respiratory virus. Pfizer said it believes ReViral’s programs, if successful, could generate annual revenue of more than $1.5 billion.4
Pfizer also announced that its COVID-19 pill, Paxlovid, will be available at pharmacies across the country, as the BA.2 sub-variant drives an uptick in cases. Paxlovid is poised to be one of the fastest-selling therapies of all time, with revenue estimates of almost $24 billion in 2022.5
Novo Nordisk, Expanding Treatments
Novo Nordisk A/S is a global leader in branded diabetes markets, capturing 30% of the U.S. market. Novo Nordisk is also a global leader in obesity prescription drugs, with a 78% market share. Combined, these two markets are worth more than $100 billion, and are growing annually by double digits. By 2025, the company wants to expand into cardiovascular and chronic kidney disease treatments.6
LIFE ETF: Investing in the Healthcare Industry
One way to simplify investing in the cutting-edge healthcare industry is through an ETF. A healthcare ETF offers a diversified portfolio of holdings in healthcare stocks. ETFs ensure that your risk is diversified, but that you are still invested in blue-chip names that you trust.
Evolve Global Healthcare Enhanced Yield Fund (LIFE ETF) provides investors with exposure to twenty global blue-chip companies in the healthcare industry, with a covered call strategy that is actively managed to provide increased yield potential while helping mitigate risk. LIFE ETF is available in hedged, unhedged and USD classes, as well as mutual fund versions.
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- Jordan, D. “Soaring petrol prices send US inflation to 40-year high,” BBC, April 12, 2022; https://www.bbc.com/news/business-61083104.
- Evans, P. “Canada’s inflation rate jumps to new 31-year high of 6.7%,” CBC, April 20, 2022; https://www.cbc.ca/news/business/canada-inflation-1.6424388.
- Flanagan, C. “Healthcare stocks have record week as investors run for safety,” The Economic Times, April 9, 2022; https://economictimes.indiatimes.com/markets/stocks/news/healthcare-stocks-have-record-week-as-investors-run-for-safety/articleshow/90742049.cms.
- “Pfizer to Acquire ReViral and Its Respiratory Syncytial Virus Therapeutic Candidates,” Pfizer Inc., April 7, 2022; https://www.pfizer.com/news/press-release/press-release-detail/pfizer-acquire-reviral-and-its-respiratory-syncytial-virus.
- Paton, J. “Pfizer’s Covid Pill Is Poised to Be Among the Fastest-Selling Treatments of All Time,” Bloomberg, April 22, 2022; https://www.bloomberg.com/news/articles/2022-04-22/covid-antiviral-pills-seen-surging-after-slow-initial-uptake.
- “What We Do,” Novo Nordisk A/S, last accessed May 5, 2022; https://www.novonordisk.com/about/what-we-do.html.