With the healthcare sector having come to the world’s rescue at the behest of governments during the pandemic, one would be forgiven for thinking that it should now be a stock market darling – the industry’s response has certainly improved its image. Yet, despite having outperformed in recent years, the MSCI World Healthcare index is at another low relative to the MSCI All Country World index. Various factors account for this including a rotation in market leadership and regulatory concerns. However, while stock and subsector selection will as usual remain of key importance, various catalysts offer the prospect of a re-rating.
Sentiment and fundamentals
The Oxford AstraZeneca vaccine helped more people than any other, is the most widely accepted with around 120 governments recognising it, is approved by the World Health Organisation, and was priced at cost. And yet, over the last year, when the FTSE All-Share has risen over 20 per cent, the company’s share price has lagged far behind. Such performance reflects the malaise generally regarding the sector’s stock market plight – the index is trading at around a 15 per cent discount to broader equity indices.