Opportunities in the Health Care Sector


Most people don't want to go physically into a hospital or a physician's office because they might end up sitting next to someone who's sick with this virus. So this is a great way to avoid that potential physical contact and enforce your social distancing. In fact, in the last few weeks, almost every physician I have talked to has stopped doing visits in their office physically and have switched all of those visits to some sort of virtual visits. It took a week or two, but a lot of them are doing it now and they're going to keep doing this until the lockdowns ease and people feel comfortable going back to seeing people in person. But I think once you let the genie out of the bottle of telehealth or doing some visits virtually, I think some people are going to keep doing it and physicians surprisingly are also very positive about it. So that's another very positive area. One area that we're going to see some short-term negative consequences in is elective surgeries. Many hospitals in areas with significant outbreaks have halted elective surgeries. You can't get a hip implant, a knee implant, even some cardiac surgeries, even cancer surgeries in some hospitals, and some areas have been stopped and there is no date for when these are going to restart. These hospitals need to know they are not crammed full of potentially infectious patients before they can bring a healthy person in to do an elective surgery. We're watching that and watching those stocks, but there's been a lot of movement both positive and negative across the entire space. Dennis Hearns : Well, now a large part of your role as head of the health care analyst team is providing idea flow and recommendations to the portfolio managers. What type of questions are they asking you as they try to navigate these unusual times? Teresa McRoberts : The number one question everybody wants to know is, when do we get back to normal? And I think it's probably going to take a little longer than most people think. That's not to say we can't unlock, but normal is what we did six months ago. I think that it takes a while to normal, requires a vaccine and that vaccines usually take a few years, but we will see a gradual return to normal for some activities. But until we have a vaccine, going to a crowded restaurant, sitting in a stadium with thousands of other people

shoulder to shoulder, it's probably not going to be something that most people are going to want to do and that I'm not sure the authorities are going to feel like it's safe to do. I think we need a vaccine and there's many, many people working on this. And once we get that, I think we will be back to normal. But until then, I think we're going to have incremental normal.

Dennis Hearns : What do you see as the main drivers of health care sector outperformance today?

Teresa McRoberts : The biggest thing is innovation. Health care has always been driven by innovation. What are the three rules of real estate? It's location, location, location. In health care, it's mostly innovation, innovation. And then at various points in times, it's also about politics or reimbursement or regulatory issues. But at the end of the day, the space has always been driven by innovation. And right now because of coronavirus, we've seen some shifts in innovation. People who didn't have anything to do with this virus because we didn't know about it a few months ago, are now already vaccinating people, treating people to see if they can deal with this. And that kind of rapid response and that ability to innovate is what makes this space so very attractive. Having an active strategy is also very important because a lot of the ETFs simply are passive strategies. You just get a handful of the bigger companies. So, if you want to innovate up and down small to large cap companies, it is really helpful to look at an active product. One of the things that, prior to coronavirus, there was a lot of fear about politics last year and what health care would do under a Warren or Sanders presidency and that caused the group to underperform. Now that the fears of that have dissipated when it looks like we're going to have Biden as a nominee, a more moderate person who has, seems to have a lot of respect for the value of innovation, that's a big positive for the group. So we're starting to see health care come back into favor. It's one of the best groups this year. And I am actually much more bullish than I have been in a long time on the outlook for the group

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