Analyst Profile – Charmaine Chan
Throughout the month of May and in celebration of Asian Pacific American Heritage Month, we are highlighting our Portfolio Managers and analysts who are critical to Cambiar’s success.
What’s an investment theme you are focused on in 2021 and why?
The healthcare sector is in the midst of a hangover after vaccine-induced optimism and indiscriminately soaring valuations (Nov 2020 into early 2021). The re-basing of forward earnings is most acutely felt with COVID-winners (e.g. Diagnostics, Tools, CDMO subsectors), and of forward multiples most apparent with small caps. The latter is exacerbated by the fact many smaller companies have potentially promising technology that are pre-commercialization, and are long-duration assets impacted by higher cost of capital should interest rates rise with inflation that may or may not be so transitory.
The Biden administration, while politically middle-of-the-road that has pledged support to ACA expansion vs more draconian reform, has nevertheless brought back risks of drug pricing to investors’ minds. Their recently stated support of the proposed waiver for COVID vaccines, if ratified by a large majority of WTO members, represents tail risks to the previously ironclad protection of intellectual property rights enjoyed by Pharma, and by extension, all technology-intensive sectors. On a more positive note, the administration’s greater support for alternative modes of delivery of care (e.g. home health, community-based, capitated care) could make healthcare more holistic and efficient for seniors. There is an exciting new class of public companies focused on tech-enablement and innovative care delivery, however, not with undemanding valuations.
As a whole, we foresee a wealth of investment opportunities ahead, though selection for quality and valuation sensitivity is even more crucial now than in a banner year like 2020.
Learn more about Charmaine Chan.
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