This article series provides a monthly dashboard of industries in each sector of the GICS classification. It compares valuation and quality factors relative to their historical averages.<\/p>\n
Biotechnology is close to its historical average in valuation ratios but below it in profitability measured in ROE. Pharmaceuticals look good in Price\/Earnings and Price\/Free Cash Flow but very bad in Price\/Sales and ROE. Other healthcare industries look overvalued by at least 20%. Life Science Tools\/Services are significantly above their baseline in profitability, which may partly justify overpricing. Healthcare Equipment is the less appealing group, significantly worse than its historical averages in all metrics.<\/p>\n
Since last month:<\/p>\n
P\/E is stable in Managed Healthcare, Healthcare Technology, and Life Science Tools and has deteriorated in Biotechnology, Pharmaceuticals, and Healthcare Equipment.<\/p>\n
P\/S has improved in Healthcare Technology and Biotechnology and deteriorated in Life Science Tools, Pharmaceuticals, and Healthcare Equipment.<\/p>\n
P\/FCF has improved in Healthcare Equipment, Managed Healthcare, and Life Science Tools and deteriorated in Biotechnology, Pharmaceuticals, and Healthcare Technology.<\/p>\n
ROE has improved in Life Sciences Tools and deteriorated in Healthcare Technology and Pharmaceuticals.<\/p>\n
In one trailing month, the SPDR Select Sector Healthcare ETF (XLV) and the S&P 500 Pharmaceuticals ETF (XPH) have outperformed the SPDR S&P 500 ETF (SPY) by about 2%, whereas the Nasdaq Biotechnology ETF (IBB) did so by about 6%.<\/p>\n
The five best performers among S&P 500 Healthcare stocks in this period are Biogen Inc. (NASDAQ:BIIB), Gilead Sciences Inc. (NASDAQ:GILD), Incyte Corp. (NASDAQ:INCY), Perrigo Company Plc (NASDAQ:PRGO), and Varian Medical Systems Inc. (NYSE:VAR).<\/p>\n
The stocks listed below are in the S&P 1500 index, cheaper than their respective industry factor for Price\/Earnings, Price\/Sales, and Price\/Free Cash Flow. The 10 companies with the highest Return on Equity are kept in the final selection.<\/p>\n
I update every month 8 lists like this one covering all sectors (some sectors are grouped). The 8 lists together have returned about 25% in 2016. If you want to stay informed of updates, click \"Follow\" at the top of this page. My Marketplace Subscribers have an early access to the stock lists before they are published in free articles. Past performance is not a guarantee of future result. This is not investment advice. Do your own research before buying.<\/p>\n
Amgen Inc. (NASDAQ:AMGN)<\/p>\n
BIOTECH<\/p>\n
Biogen Inc. (BIIB)<\/p>\n
BIOTECH<\/p>\n
Bioverativ Inc. (NASDAQ:BIVV)<\/p>\n
BIOTECH<\/p>\n
Eagle Pharmaceuticals Inc. (NASDAQ:EGRX)<\/p>\n
BIOTECH<\/p>\n
Gilead Sciences Inc. (GILD)<\/p>\n
BIOTECH<\/p>\n
AMN Healthcare Services Inc. (NYSE:AMN)<\/p>\n
HCAREPROVID<\/p>\n
DaVita Inc. (NYSE:DVA)<\/p>\n
HCAREPROVID<\/p>\n
McKesson Corp. (NYSE:MCK)<\/p>\n
HCAREPROVID<\/p>\n
INC Research Holdings Inc. (NASDAQ:INCR)<\/p>\n
MEDEQUIP<\/p>\n
Phibro Animal Health Corp. (NASDAQ:PAHC)<\/p>\n
PHARMA<\/p>\n
I take 4 aggregate industry factors provided by portfolio123: Price\/Earnings (P\/E), Price-to-Sales (P\/S), Price-to-Free Cash Flow (P\/FCF), and Return on Equity (ROE). My choice has been justified here and here. Their calculation aims at limiting the influence of outliers and large caps. They are reference values for stock picking, not for capital-weighted indices.<\/p>\n
For each factor, I calculate the difference with its own historical average: to the average for valuation ratios, from the average for ROE, so that the higher is always the better. The difference is measured in percentage for valuation ratios, not for ROE (already in percentage).<\/p>\n
The next table reports the 4 industry factors. There are 3 columns for each factor: the current value, the average (Avg) between January 1999 and October 2015 taken as an arbitrary reference of fair valuation, and the difference explained above (D-xxx).<\/p>\n
P\/E<\/p>\n
Avg<\/p>\n
D- P\/E<\/p>\n
P\/S<\/p>\n
Avg<\/p>\n
D- P\/S<\/p>\n
P\/FCF<\/p>\n
Avg<\/p>\n
D- P\/FCF<\/p>\n
ROE<\/p>\n
Avg<\/p>\n
D-ROE<\/p>\n
Health Care Equipment<\/p>\n
46.58<\/p>\n
27.18<\/p>\n
-71.38%<\/p>\n
4.28<\/p>\n
3.18<\/p>\n
-34.59%<\/p>\n
43.55<\/p>\n
30.51<\/p>\n
-42.74%<\/p>\n
-36.43<\/p>\n
-12.14<\/p>\n
-24.29<\/p>\n
Managed Health Care<\/p>\n
26.67<\/p>\n
20.88<\/p>\n
-27.73%<\/p>\n
1.07<\/p>\n
0.85<\/p>\n
-25.88%<\/p>\n
21.15<\/p>\n
17.75<\/p>\n
-19.15%<\/p>\n
8.03<\/p>\n
5.78<\/p>\n
2.25<\/p>\n
Health Care Technology*<\/p>\n
78.89<\/p>\n
56.13<\/p>\n
-40.55%<\/p>\n
3.18<\/p>\n
3.39<\/p>\n
6.19%<\/p>\n
40.42<\/p>\n
35.77<\/p>\n
-13.00%<\/p>\n
-20.98<\/p>\n
-6.2<\/p>\n
-14.78<\/p>\n
Biotechnology<\/p>\n
40.12<\/p>\n
39.78<\/p>\n
-0.85%<\/p>\n
35.81<\/p>\n
29.01<\/p>\n
-23.44%<\/p>\n
34.09<\/p>\n
43.74<\/p>\n
22.06%<\/p>\n
-76.88<\/p>\n
-64.42<\/p>\n
-12.46<\/p>\n
Pharmaceuticals<\/p>\n
28.6<\/p>\n
<\/p>\n
Visit link: This article series provides a monthly dashboard of industries in each sector of the GICS classification. It compares valuation and quality factors relative to their historical averages. Continue reading
\nValuation Dashboard: Healthcare - Update - Seeking Alpha<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"