BCA Weekly Commentary 12/31/21: Healthcare Opportunities Abound
ECONOMIC IMPACT. Our macro assumptions going into 2022 continue to be waning growth & inflation as well as Covid-19 cases. The former is based on the reduction of money printing via Fed as well as rate hike prospects and the fall in real wages (wages ex inflation) which may translate into lower consumer spending. The huge spike in Covid-19 cases has INCREASED our conviction that "herd immunity" may be the end result despite the efforts to force vaccinations. This forced vaccination appears to be causing many negative consequences for the economy in the short term. We believe many health care stock fundamentals have been impacted tied to slowing sales & cases as covid-19 cases spike and staffing shortages result of forced vaccinations. Much like in early 2020, we deem this transitory or temporary, and if proven correct, case loads across the healthcare sector will normalize and resume growth. We made a similar case at the onset of Covid-19 in early 2020 in regards to its impact on overall growth which was proven correct.
INVESTMENT IMPACT. The impact of covid-19 has presented numerous opportunities particularly in smaller capitalization secular growth companies particularly in heath care which have fallen in 2021. As mentioned above, the disruptions in revenue growth may prove temporary. We remain significantly overweight healthcare for this reason and our concern over economic growth. Since healthcare is less dependent on economic growth it may make companies more attractive for growth investors as growth slows as well as inflation. For the week we added 2 new healthcare names to our model portfolios while eliminating one and plan on adding a 3rd in the new year. We remind investors that fund liquidations and tax loss year end selling may have exaggerated selling into year end. Further, since there remains much optimism on economic growth in 2022 which may prove incorrect, a shift to health care names that can growth thru slower economic growth and waning covid-19 maybe still in front of us.
Our model portfolio performance has been updated on our website as of 12/31/21.
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