EQS Group-News: Bellevue Asset Management AG
/ Key word(s): Market Report
27.05.2020 / 08:45
Market commentary May 27, 2020
A safe place in the event of unexpected coronavirus troubles
A commentary by Stefan Blum and Marcel Fritsch, Portfolio Managers of the BB Adamant Medtech & Services Fund, Bellevue Asset Management
The medtech & services sector continued to display its defensive qualities amid the corona crisis and performed relatively well while the market tanked. Covid-19 is likely to have an only mild, temporary effect on this sector's fundamental factors. The sector's resilience can be traced to the non-cyclical nature of market demand for its solutions. Many health problems must still be treated regardless of the crisis (e.g. heart issues, bone fractures, etc.). That said, during the height of the pandemic, less urgent procedures such as hip and knee replacement surgery did have to be postponed. These operations were not permanently canceled, though - they will be performed at a later point in time, which will boost underlying demand when the time comes. Even a recession would have little impact on the medtech & services sector because demand as well as prices are very stable, the latter due to the reimbursement of costs from health insurers.
Return to normalcy
The course of the global Covid-19 pandemic and the availability of diagnostic tests are factors that will help to usher the world back to a normal state. Germany is already in the midst of the recovery phase. In the US, several states have eased stay-at-home orders and a general return to normalcy there is likely from mid-June on. This projected development corresponds to the desired outcome we outlined at the beginning of the crisis.
The trends are pointing in the right direction, especially considering that statements by government officials and medical associations support the forecast of a market recovery in the fourth quarter of 2020. We therefore expect a return to normal market growth by year-end - and we might already see a sequential acceleration in growth in the third quarter. Against the backdrop of the largely positive company earnings announcements for the first quarter of 2020, this scenario is also encouraging for investors.
US health insurance stocks heavily discounted
Inexpensive US health insurers strong in administering managed care benefits that the US government has turned to in an effort to make the healthcare system more efficient would be hardly affected by a recession and are thus a good hedge for any unexpected Covid-19 troubles. Neither Joe Biden nor Donald Trump have advocated policies that would be negative for the managed care sector. A future rise in costs can be calculated into the health insurance premiums that insurers charge for 2021. Despite its clearly better-than-average outlook, this sub-sector is trading at a 20% discount to the S&P 500 and therefore offers significant upside potential.
A significant acceleration in growth is particularly likely at insurers that specialize in Medicaid, the government program for low-income households, or in health insurance marketplaces. Even insurers who do much of their business in the commercial health insurance segment are likely to report an only mid-single-digit decline in earnings next year, which would be due to a decline in the number of insured persons.
Focus on large caps
Large cap stocks are overweighted in the fund's portfolio, which enhances its stability. Considering the above, besides the Medicaid players such as Centene and Molina, insurers that are strong in administering Medicare benefits, Humana for instance, appear attractive. Other portfolio companies that offer good upside are Stryker, a manufacturer of orthopedic and surgical implants, and Inspire Medical, which is concentrating on innovative approaches for treating patients with obstructive sleep apnea.
BB Adamant Medtech & Services' 3-year performance of nearly 55% represents an excess performance of more than 36 percentage points over the MSCI World Net Index. The fund has performed even better compared to the EuroStoxx 50 Index, racking up an excess performance of more than 67 percentage points. The fund's trailing 12-month performance is 13%, which beats the performance of the MSCI World by 10 percentage points (all data as of May 22, 2020).
For further information:
Bellevue Asset Management AG, Seestrasse 16 / P.O. Box, CH-8700 Küsnacht/Zurich
Tanja Chicherio, Tel. +41 44 267 67 09, [email protected]
Bellevue Asset Management
Bellevue Asset Management and its sister company StarCapital based in Oberursel outside Frankfurt, Germany are part of Bellevue Group, an independent, Swiss financial group registered in Zurich and listed on the Swiss Exchange SIX. Bellevue was established in 1993 and is a leading investment boutique specialized in healthcare equities and traditional as well as alternative investment strategies with assets under management of CHF 10.6 billion.
Disclaimer: This document is neither directed to, nor intended for distribution or use by, any person or entity who is a citizen or resident of any locality, state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. It is particularly not intended for US persons, as defined under Regulation S of the U.S. Securities Act of 1933, as amended. The information and data presented in this document are not to be considered as an offer to buy, sell or subscribe to any securities or financial instruments. The information, opinions and estimates contained in this document reflect a judgment at the original date of release and are subject to change without notice. This information pays no regard to the specific or future investment objectives, financial or tax situation or particular needs of any specific recipient and in particular tax treatment depends on individual circumstances and may be subject to change. This document is not to be relied upon in substitution for the exercise of independent judgment. Before making any investment decision, investors are recommended to ascertain if this investment is suitable for them in the light of their financial knowledge and experience, investment goals and financial situation, or to obtain specific advice from an industry professional. The details and opinions contained in this document are not to be considered as recommendation or investment advice. Every investment involves risk, especially with regard to fluctuations in value and return, and investors' capital may be at risk. If the currency of a financial product is different from your reference currency, the return can increase or decrease as a result of currency fluctuations. Past performance is no indicator for the current or future performance. The performance data are calculated without taking account of commissions and costs that result from subscriptions and redemptions. Commissions and costs have a negative impact on performance. For more information about the associated costs, please refer to the related costs and fees section of the prospectus. Any benchmarks/indices cited herein are provided for information purposes only. No benchmark/index is directly comparable to the investment objectives, strategy or universe of the subfund. The performance of a benchmark shall not be indicative of past or future performance of the subfund. Financial transactions should only be undertaken after having carefully studied the current valid prospectus and are only valid on the basis of the latest version of the prospectus and available annual and halfyearly reports. Please take note of the risk factors. Countries of distribution and local representatives The Bellevue Funds (Lux) is registered and admitted for public distribution in Austria, Germany, Luxembourg, Spain and Switzerland. Austria Paying and information agent: ERSTE BANK der oesterreichischen Sparkassen AG, Am Belvedere 1, A-1100 Vienna Germany Information agent: ACOLIN Europe GmbH, Reichenaustrasse 11a-c, D-78467 Konstanz Spain Representative: atl Capital, Calle de Montalbán 9, ES-28014 Madrid - CNMV under the number 938 Switzerland The Bellevue Funds (Lux) SICAV is registered for public offering and distribution in Switzerland with the Swiss Financial Market Supervisory Authority. Representative agent in Switzerland: ACOLIN Fund Services AG, Leutschenbachstrasse 50, CH-8050 Zurich Paying agent in Switzerland: Bank am Bellevue AG, Seestrasse 16, P.O.Box, CH-8700 Küsnacht You can obtain the sales prospectus, Key Investor Information Document ("KIID"), statutes and the current annual and half-yearly reports, the current share prices and further information about the fund free of charge in German from the management company Bellevue Asset Management AG, Seestrasse 16, CH-8700 Küsnacht, the representative agent in Switzerland or online at www.bellevue.ch. In respect of the units distributed in or from Switzerland, the place of performance and jurisdiction is at the registered office of the representative agent.