Profit from sectors providing Covid 19 Solutions
The final theme in our 6-part series is Healthcare and Pharmaceuticals.
While the global pandemic seems to be “under control” and vaccine trials on the go, there's a continued focus on healthcare, hospitals and medication. These form part of a defensive sector that is generally less cyclical.
In preparation for an increase in Covid-19 patients the healthcare sector ramped up medical equipment and infrastructure needed to sustain the lives of those infected.
Vaccine production and trials have accelerated as countries push to get an approved drug rolled out.
China's Sinovac leads the race with its CoronaVac, as it moves to stage two of the clinical trials following a positive outcome in preliminary testing on 144 individuals. It has started developing a commercial vaccine facility, that will be capable of making 100 million CoronaVac vaccines per year.
With significant attention on how fast infectious diseases and viruses can spread globally, the world will be better prepared for future pandemics. The biggest lesson from the Covid-19 pandemic is how not being prepared for pandemics can cripple the global economy.
One of our favorite stocks in this sector is Mediclinic, it published results last week. Its performance in a tough environment was decent. When you strip out the impairments of Spire and the Middle east it would have made a profit.
Management have decided to halt dividend payments to retain essential liquidity in the company. One of the biggest positives is its improved cash conversion at 109% of EBITDA. And there shouldn't be any significant impairments in the future.
There's a big focus on digitization to improve efficiencies and build innovative care delivery models this will ensure the company remains competitive going forward.
With some profit taking materialising, investors should wait for a further pullback in MediClinic's price.
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See you next week.
Contributing Editor, Money Morning