Our theme of Out Of Favor Health Care Stocks includes healthcare and pharmaceutical names that are seeing a disconnect between their financial performance and recent stock price returns. The theme declined by about 18% over the last year and remains down by about 33% this year.
However, there are a couple of reasons why the stocks in the theme could be worth a look at the moment. The theme screens for healthcare companies that have grown revenue by at least 50% over the last three years, with operating margins also expanding, and despite this, have seen their stocks return less than 10% since early 2020, a period through which the broader S&P 500 has gained close to 30%. There are a couple of specific trends that could help the stocks in this theme in the near-to-medium term. Firstly, investors could continue to rotate out of richly valued stocks to value picks and beaten-down names as they prep for further rate interest rate hikes and tightening monetary policy. There are also concerns about the global economy after the U.S. GDP unexpectedly contracted over Q1 2022 and healthcare stocks, which are typically insulated from the broader economy, could hold up better than other sectors. Moreover, investor focus within the healthcare sector could also move from Covid-era favorites, such as vaccine stocks, to other players that stand to benefit from the reopening of elective procedures. Below is a look at some of the companies in our theme.
Within our theme, Emergent Biosolutions (NYSE:EBS), a company that develops vaccines and antibody therapeutics, is valued the cheapest, with the next lowest multiple being that of Teladoc (NYSE:TDOC). In terms of growth, in the last 12 months, CRISPR Therapeutics (NASDAQ: CRSP) has grown its revenue base the fastest, followed by Teladoc. Among the companies considered, Intuitive Surgical (NASDAQ: ISRG) is the largest, with a market cap of $78 billion followed by Align Technology (NASDAQ: ALGN). See our theme of Out Of Favor Health Care Stocks for a complete list of companies.
|S&P 500 Return||1%||-13%||86%|
|Trefis Multi-Strategy Portfolio||3%||-17%||227%|
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 Month-to-date and year-to-date as of 6/8/2022
 Cumulative total returns since the end of 2016