Getting Organized - Healthcare
Healthcare is always a tough group for value investors. This is the group where I have the least experience. However, if you have economic concerns, you have to try and find some value here. I am happy with Revvity (the old Perkin-Elmer) - RVTY - $117, as a play on the recovery in the lab equipment business. Here I am partially relying on the work of a hedge fund called Select Equity, that owns a dozen stocks I admire. RVTY is one of their large holdings. My second healthcare idea in the model portfolio is Royalty Pharma - RPRX - $28. I have 30+ years of experience with the gold royalty business, why not try the same thing in drugs/biopharma.
I could not argue with a value person using any of my top 12 ideas on this list. Or you could even make the case for just owning Merck and Bristol-Myers, and avoiding all the damn time consuming analysis.
Healthcare is 6% of the mid cap indices. So with two stocks, I am a little over-weighted.
In a world where I believed in the economy, I just might own two retailers, and two consumer durable names, and forget that healthcare even exists. It certainly a choice for a value investor to try healthcare. I could just own ConAgra and a liquor stock and avoid healthcare altogether. That is a temptation. Food/Beverage stocks, or economic cyclicals, have a degree of semi-predicability. Healthcare is fraught will regulatory and legal issues that are impossible to predict. For educational purposes I will continue to search healthcare for ideas, but can I really understand these companies?
My top healthcare ideas in order:
Azenta - AZTA - $49 - complex, used to be Brooks Automation, now has storage facilities for bio/pharma research. Smart guys executing a plan.
Perrigo - PRGO - $29 - alway seems to have complex legal issues, a little over-leveraged, a battleground stock
Henry Schien - HSIC - $71 - grinding it out in dental supplies, simple and solid story
Baxter - BAX - $38 - continued financial engineering, a little shaky in the legacy business
Avantor - AVTR - $26 - the old Mallinckrodt business after private equity swallowed it and spit it back, lab equipment has been through a tough cycle
Charles River - CRL - $205 - much more than animal testing, needs more work
Smith & Nephew - SNN - $31 - easy to understand orthopedic surgery story,
Acadia - ACHC - $80 - the leader in mental health, just a little promotional
Neogen - NEOG - $17 - still digesting a big MMM deal, complex
Patterson - PDCO - $25 - second tier dental supplies, cheap
Elanco - ELAN - $15 - animal health, but I have enough agriculture exposure
Hologic - HOLX - $80 - women health, expensive
Astrana - ASTH - $48 - my favorite growthy small cap health care stock, do they have the secret sauce?
Viatris - VTRS - $12 - slow moving generics maker with plenty of controversy
Haemonetics - HAE - $76 - solid long-term story, I need to learn more
Prestige - PBH - $72 - boring and expensive
Avanos - AVNS - $24 - cheap, but I need to learn more
West Pharma - WST - $303 - great business, but at what price?
Merck - MRK - $117 - my favorite in big cap pharma
Tenet - THC - $165 - doing too well in surgi-centers