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 in each industry, and gives a list of 10 stocks. 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-access articles. <\/p>\n
Executive summary <\/p>\n
Biotechnology looks cheap relative to its own historical averages in valuation factors. Life Sciences Tools\/Services and Managed Healthcare look slightly overpriced and above the historical average in profitability (measured by ROE). Other groups are less appealing. The Pharmaceutical industry is close to the baseline in P\/E and undervalued for P\/FCF, but much worse regarding P\/S and ROE. The worst group here and the only healthcare industry with all factors worse than their historical averages is Healthcare Equipment. <\/p>\n
Since last month: <\/p>\n
Some cheap stocks in their industries <\/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 companies with the highest Return on Equity are kept in the final selection. <\/p>\n
This strategy rebalanced monthly has an annualized return about 22.34% for a 17-year backtest. The sector ETF XLV has an annualized return of only 7.73% on the same period. Past performance is not a guarantee of future result. This is not investment advice. Do your own research before buying. <\/p>\n
ABBV <\/p>\n
AbbVie Inc <\/p>\n
BIOTECH <\/p>\n
ABC <\/p>\n
AmerisourceBergen Corp <\/p>\n
HCAREPROVID <\/p>\n
AMGN <\/p>\n
Amgen Inc <\/p>\n
BIOTECH <\/p>\n
BIIB <\/p>\n
Biogen Inc <\/p>\n
BIOTECH <\/p>\n
CAH <\/p>\n
Cardinal Health Inc <\/p>\n
HCAREPROVID <\/p>\n
GILD <\/p>\n
Gilead Sciences Inc <\/p>\n
BIOTECH <\/p>\n
MCK <\/p>\n
McKesson Corp <\/p>\n
HCAREPROVID <\/p>\n
PRXL <\/p>\n
PAREXEL International Corp <\/p>\n
MEDEQUIP <\/p>\n
UTHR <\/p>\n
United Therapeutics Corp <\/p>\n
BIOTECH <\/p>\n
Detail of Valuation and Quality indicators in Healthcare on 2\/8\/2017 <\/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), 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
43.01 <\/p>\n
27.18 <\/p>\n
-58.24% <\/p>\n
4.01 <\/p>\n
3.18 <\/p>\n
-26.10% <\/p>\n
38.66 <\/p>\n
30.51 <\/p>\n
-26.71% <\/p>\n
-33.87 <\/p>\n
-12.14 <\/p>\n
-21.73 <\/p>\n
Managed Health Care <\/p>\n
22.95 <\/p>\n
20.88 <\/p>\n
-9.91% <\/p>\n
1.04 <\/p>\n
0.85 <\/p>\n
-22.35% <\/p>\n
18.26 <\/p>\n
17.75 <\/p>\n
-2.87% <\/p>\n
8.28 <\/p>\n
5.78 <\/p>\n
2.5 <\/p>\n
Health Care Technology* <\/p>\n
83.28 <\/p>\n
56.13 <\/p>\n
-48.37% <\/p>\n
3.06 <\/p>\n
3.39 <\/p>\n
9.73% <\/p>\n
35.12 <\/p>\n
35.77 <\/p>\n
1.82% <\/p>\n
-14.56 <\/p>\n
-6.2 <\/p>\n
-8.36 <\/p>\n
Biotechnology <\/p>\n
27.8 <\/p>\n
39.78 <\/p>\n
30.12% <\/p>\n
31.94 <\/p>\n
29.01 <\/p>\n
-10.10% <\/p>\n
36.09 <\/p>\n
43.74 <\/p>\n
17.49% <\/p>\n
-68.17 <\/p>\n
<\/p>\n
Read the original here:<\/p>\n
Valuation Dashboard: Healthcare - Update - Seeking Alpha<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" 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 in each industry, and gives a list of 10 stocks. I update every month 8 lists like this one covering all sectors (some sectors are grouped). Continue reading